Mad Money

Cramer Remix: Spotify delivered on earnings—here’s why investors dropped it anyway

Key Points
  • "Mad Money" host Jim Cramer breaks down why Spotify was punished for investors' out-of-control expectations.
  • Cramer also hears from the CEO of a top oil and gas producer and the head of Bank of America's digital banking segment.
Cramer Remix: Spotify delivered on earnings—here’s why investors dropped it anyway

When CNBC's Jim Cramer thinks the stock market misjudged an earnings report — like he says it did with Spotify's first report as a public company — he feels obliged to step in and clear things up.

"Whenever the market makes a particularly egregious error, I like to go back and set the record straight," the "Mad Money" host said on Monday. "After all, nothing screams 'buying opportunity' like a stock that's been unfairly punished."

Such is the case with music streaming service Spotify, which recently delivered its first earnings results since listing directly on the New York Stock Exchange in early April.

Shares of Spotify fell as much as 11 percent the day after the report, marking the stock's worst trading day since its listing. At first glance, it seemed like Spotify had missed the numbers.

But "upon further review, it turns out this company hit all of its targets it set out for when it started trading," Cramer said. "You heard me: Spotify got clobbered for delivering in-line numbers."

Cramer chalked up Spotify's drastic decline to the unusual nature of the company, commending its management for being straightforward with its guidance.

"Do not let last week's sell-off in Spotify scare you," Cramer said. "It just got punished because a bunch of investors let their expectations get out of control. To me, that says these guys are incredibly straight-shooters. I think that's amazing. I'd be a buyer."

Cramer on Buffett's Amazon and Google admission

Warren Buffet walks the floor at the 2018 Berkshire Hathaway Annual Shareholder's Meeting in Omaha, NE on May 5th, 2018.
Lacy O'Toole | CNBC

As Berkshire Hathaway wraps up its event-filled annual shareholder meeting, Cramer reflected on some of the weekend's most interesting revelations.

Warren Buffett, the CEO of Berkshire and a widely renowned investor, admitted on Saturday that he "made the wrong decisions on Google and Amazon," having considered both stocks with his longtime partner, Charlie Munger.

"I had a very, very, very high opinion of Jeff's [Jeff Bezos, CEO of Amazon] ability when I first him, and I underestimated him," Buffett said at the Omaha, Nebraska investor gathering.

But Cramer argued that Buffett and Munger's hesitation on investing in Amazon and Google parent Alphabet could've stemmed from something more generational.

While Berkshire holds a massive stake in the stock of Apple, Cramer said that Buffett's personal aversion to the iPhone could have been what stopped him from buying shares of Amazon or Alphabet.

"While these services — Amazon and Alphabet's Google — worked well on the computers, it really was the rise of the smartphone that sent their sales into the stratosphere," Cramer explained. "But if you didn't have a smartphone, you were never going to understand this storyline."

Estee Lauder: Bucking consumer trends or falling behind?

Fabrizio Freda, President and CEO of Estee Lauder.
Getty Images

As shares of Estee Lauder Companies slid on Monday amid widespread weakness in the consumer packaged goods stocks, Cramer came out in defense of the decades-old beauty giant.

"The truth is Estee Lauder's miles ahead of its peers and the stock deserves to be a lot higher," Cramer said. "Bizarrely, this stock's been getting slammed ... as investors didn't like everything they heard on the conference call."

Estee Lauder's third-quarter earnings report beat analysts' top- and bottom-line estimates, with 13 percent sales growth and a 17 percent boost to net income.

But the post-earnings conference call sparked some bearish worries among investors. On the call, Estee Lauder President and CEO Fabrizio Freda indicated that growth in the cosmetics space was starting to level off after years of expansion.

The CEO also disclosed that some claims the company made about how long its makeup stays on weren't entirely accurate.

"It's not the end of the world, but the company's about as well-run as it gets, so the idea that there was a group of rogue employees who [were] basically lying to the customers struck a pretty downbeat chord," Cramer said.

Still, Cramer had faith in Freda, who took over as CEO in 2009 after nearly 30 years at Procter & Gamble.

Bank of America's digital banking chief on going cashless

Stephan Drescher | E+ | Getty Images

The rise of digital peer-to-peer payment services in the banking world is paving the way to a new, cashless reality, Bank of America's Head of Digital Banking, Michelle Moore, told CNBC.

"We would like to get cash out of the system," Moore said in an interview with Cramer. "It needs to be about security [and] ease."

Bank of America is a leader in mobile and online banking, with 33 million digital customers including over 21 million mobile banking app users.

Moore told Cramer that Bank of America saw 1.4 billion mobile logins just in the first quarter, which amounts to about 100 million logins a week.

"The secret is understanding what our customers want," Moore said. "We listen to them and we give them what they want, not what we want."

Whiting Petroleum CEO: 'Bullish on oil long term'

Brad Holly, CEO of Whiting Petroleum.
Adam Jeffery | CNBC

Oil prices hit a fresh all-time high on Monday before declining ahead of President Donald Trump's policy announcement on Iran. And if you ask Brad Holly, the president and CEO of Whiting Petroleum, he'll tell you these kinds of swings are here to stay.

"I think it's going to be very volatile going forward," he told CNBC in a Monday interview with Cramer. "There's certainly geopolitical events that could happen, but we think the fundamentals are strong."

Whiting, an independent oil and gas producer that mainly does business in North Dakota's Bakken shale, is very active in managing its portfolio and seeking "tier-one" assets, Holly told Cramer. For Holly, focusing on the industry's fundamentals is essential to those goals.

"We think inventories are in place, we think demand – one and a half million barrels a day – is strong," the CEO said. "We think the supply may have trouble making up for that demand, and so we're bullish on oil long term."

Lightning round: Unpacking the pain in pharmaceuticals

In Cramer's lightning round, he rattled off his take on callers' favorite stocks:

CVS Health Corporation: "CVS and Walgreens – I'll give you a two-fer. Both of these stocks were down, I think, because Warren Buffett said today that it'd only be a matter of months before there would be a CEO named to the Berkshire Hathaway-J.P. Morgan-Amazon health care group and I think that's weighing on everything having to do with drugstores."

Valeant Pharmaceuticals International Inc.: "Look, I think [CEO] Joe Papa's doing a good job. I mean, it's going to take a long time. They've got that big debt hoard. He's turning the thing around. It's a bit of a battleship to turn around, but I think he will do it because he's a good manager."

Disclosure: Cramer's charitable trust owns shares of Amazon, Alphabet, Apple and J.P. Morgan.

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