Salesforce.com , up 5% versus the index’s 1.1%, is the lone standout, outperforming Chipotle , Netflix , Deckers Outdoor , Intuitive Surgical , Express Scripts and even Apple . But Cramer blamed their lackluster results on a general trend right now toward cyclical stocks, which get more popular as the economy starts to turn up, and not any slowdown in these businesses.
In fact, “The long-term record of outperformance of these stocks is incredible,” Cramer said, “and I think the C.A.N.D.I.E.S. will soon return to form as growth on Wall Street never goes out of fashion.”
Most of these companies already have reported their earnings, and the numbers blew away analysts’ estimates. The only exceptions are Salesforce, which reported last quarter on May 20, and Express Scripts, which announces its quarter on Wednesday. Cramer said there’s a good chance Express Scripts could disappoint because expectations are too high, but certainly none of the others did.
Except Netflix, that is. And that’s not to say that the company disappointed. Earnings beat the Street, and both the full-year earnings and revenue forecasts were raised. But the problem, at least to analysts, was a drop in the average revenue per customer by 7.5%. They see customers’ move away from more expensive subscription plans in favor of streaming, which is free with all subscription plans, as a long-term threat to Netflix’s business.
The problem with this thinking, of course, is that it overlooks Netflix’s subscriber growth, which Cramer thinks outweighs any concerns over average revenue per customer. It isn’t about how much money the company gets per subscriber, it’s how many new subscribers are added. And this past quarter total subscribers hit 15 million, up 42% from last year and up 7% sequentially.
There’s also concern that Netflix will lose to competitors like Apple in the video streaming market, but Cramer called the two business models apples and oranges. Think of it this way: While Netflix is the HBO of video streaming, serving up commercial-free movies and television to paid subscribers, Apple is more of a pay-per-view provider. So there’s really no overlap.
Therefore, NFLX is a buy here, as is the rest of this cohort of growth stocks. And investors get an especially good price on Netflix now, as it’s still down 14% from its pre-quarter price.
“The C.A.N.D.I.E.S. are still sweet, and that includes Netflix,” Cramer said, “which has just been given a raw deal by the market, creating for you a terrific bargain.”
Quick note: While Cramer wouldn’t replace Netflix from the C.A.N.D.I.E.S. for another stock – it would ruin the acronym – he did say he also likes VMware right now. During Monday’s Stop Trading!, he called the company’s most recent report “one of the best quarters of this whole earnings period.”
When this story published, Cramer’s charitable trust owned Apple.
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