What Cramer is watching Wednesday — why Home Depot thrives while Target and Walmart stumble

Published Wed, May 18 20229:05 AM EDT

What I am looking at May 18, 2022 Target (TGT) reports a major miss with shopping patterns changing. Last year, consumers were buying TVs, furniture and kitchen appliances, driven by Covid and working from home. Now dresses for going out, toys for birthday parties and luggage for travel. Retailers had the wrong inventory (TVs and appliances). Guest traffic still strong, up nearly 4% from a year ago, same store sales rose more than 3%. But higher prices for fuel and freight, much higher than anticipated, hit earnings. Adjusted EPS of $2.19 versus $3.07 expected. Shares fell 22% in premarket trading. Walmart (WMT) the real issue here: Why didn't management preannounce earnings? They projected mid-single-digit earnings growth for the fiscal year in February, and then do negative 1% one month later. How could that be kept secret? Multiple price target cuts for WMT, which is a disaster ... Home Depot (HD) was incredibly strong because of its Pro services. Management said twice on its earnings call that "our Pro is incredibly strong." They added they were thrilled with the performance of of appliances. Pros want to Trade UP for innovation. More than 40% of Home Depot's customers are professionals. Plus really important: the homeowner really put money to work because houses went up in value, up 40% over the past two years ... the homeowner has never had a balance sheet look like this. Home appreciation drives improved demand. Lowe's (LOW) fell 3% in premarket trading after same-store sales fell more than expected and revenue came in slightly below Street estimates. Management maintained full-year guidance ... 74 basis-point improvement in gross margin. May looks good. Baird makes Block (SQ) a "fresh pick." Some issues with Afterpay. The other two liked in this group: Airbnb (ABNB) and DoorDash (DASH). Mortgage applications decreased by 11% for the week ended May 13. Doximity (DOCS), the online networking service for medical professionals, posted really disappointing fiscal fourth-quarter earnings. Management sees first quarter revenues between $88.6 million and $89.6, missing the $96.8 million consensus. Mizuho lowers price targets on several software companies on "greater degree of macro uncertainty," multiple compression. Snowflake (SNOW) PT slashed to $225 from $370. Palo Alto (PANW) $600 from $625. Crowdstrike (CRWD) goes to $220 from $270. Splunk (SPLK) $110 from $130. MongoDB (MDB) lowered to $270 from $325. Tesla (TSLA) price target lowered to $1,035 from $1,260 at Piper Sandler, reiterates its buy rating and calls stock a "cornerstone holding." Peloton (PTON) price target dropped to $13 from $30 at UBS, maintains sell rating. Susquehanna lowers Nvidia (NVDA) price target to $280 from $320, keeps positive rating. Wells Fargo likes ServiceNow (NOW), initiates with a buy. Says software company will be more resilient. Endeavor (EDR) upgraded to buy at Goldman Sachs, sees 50% upside. Warby Parker (WRBY) downgraded to neutral at Goldman, cites near-term challenges pushes back path to profit growth. Less conviction in outperformance. Chipmaker Analog Devices (ADI) earned an adjusted quarterly profit of $2.40 per share, 29 cents above estimates and reported better-than-expected sales. Shares were up 2% in the premarket. (Jim Cramer's Charitable Trust is long NVDA, WMT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A CVS Pharmacy inside a Target store in New York, April 26, 2022.

Scott Mlyn | CNBC

What I am looking at May 18, 2022

Target (TGT) reports a major miss with shopping patterns changing. Last year, consumers were buying TVs, furniture and kitchen appliances, driven by Covid and working from home. Now dresses for going out, toys for birthday parties and luggage for travel. Retailers had the wrong inventory (TVs and appliances). Guest traffic still strong, up nearly 4% from a year ago, same store sales rose more than 3%. But higher prices for fuel and freight, much higher than anticipated, hit earnings. Adjusted EPS of $2.19 versus $3.07 expected. Shares fell 22% in premarket trading.