The parent company of Calvin Klein and Tommy Hilfiger has “changed the narrative” for the retail sector, and its stock still has more upside, CNBC’s Jim Cramer said Monday after the major averages fell slightly on earnings worries.
“PVH had a very rough time in the second half of 2018. Even though shares have rallied $18 from their Christmas Eve lows, … the darned thing is still down $65, or 38 percent, from its highs last summer,” the “Mad Money” host said.
But after PVH recently raised its fourth-quarter and full-year guidance, announcing it would restructure the struggling parts of its Calvin Klein business, the prospects seriously improved for the international retailer and its counterparts, Cramer said.
“Contrary to the worries on Wall Street, PVH is actually doing better than expected across all of its businesses, whether you go by brand or by geography,” he said, recapping the announcement. “Even their Chinese business is pretty much unchanged, and North America’s strong. And, hey, if PVH can breath new life into Calvin Klein, that will be a huge positive.”
All in all, with PVH’s stock trading at only nine times next year’s earnings estimates, Cramer said investors were getting a buying opportunity in the apparel play — and some welcome relief in other retail names.
“These numbers showed that PVH’s earnings are much, much, much more resilient than most people believed,” he said. “I say there’s a lot more upside.”
Citigroup’s earnings report may have just proved that investors don’t have as much to fear as they think, Cramer said Monday after a worry-driven trading session on Wall Street.
The Citibank parent was the first of the major U.S. banks to report its fourth-quarter results. While Citi missed analysts’ revenue estimates due to late-2018 trading weakness, it handily beat profit expectations.
“When I listened to Citigroup’s terrific conference call this morning, the one that sent the stock soaring 4 percent, I sure got the sense that we have a lot less to fear than we think,” Cramer said.
The declines in the major averages, which were largely tied to concerns about 2019 earnings and an economic slowdown in China, “obscure the real story,” he argued.
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Activist hedge fund Starboard Value might be making a mistake with its involvement in Dollar Tree, but that doesn’t mean the stock’s not worth buying, Cramer says.
Having just taken a stake in the discount retailer, Starboard is calling on Dollar Tree to spin off Family Dollar and demanding seven out of its 12 board seats to ensure that happens. It has also suggested reworking Dollar Tree’s pricing model.
But after speaking with Dollar Tree President and CEO Gary Philbin after the company’s most recent earnings report, Cramer harbored some doubts about Starboard’s plans for Family Dollar.
Thankfully, he sees a few ways for investors to win regardless of which side gets its way.
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Technology executives are telling Cramer that they’re willing to endure short-term pain from the U.S.-China trade war in favor of the long-term payoff.
“When I went out to San Francisco last week, I heard the same thing from a surprising number of people in the tech industry who do not like President [Donald] Trump one bit,” the “Mad Money” host said Monday.
“What they said was ‘If we’re going to take on China, now’s the time to do it,'” he said. “They may not be fans of the president, but they’re on board with the trade war.”
Part of the reason could be tied to the pain points emerging in China’s economy, Cramer said.
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In Cramer’s lightning round, he zipped through his responses to callers’ stock questions:
Square Inc.: “Absolutely[, I still recommend Square as a long-term hold]. Square is not a value stock. Square is a growth stock. Yes, we will all miss [former CFO] Sarah Friar. She went to Nextdoor, where she’s doing a fantastic job, and she’s just monster good. But I think Square’s franchise is a terrific fintech franchise and I think they’ll do just fine and I think the customers really like Square and, full disclosure, [at my Mexican restaurant] Bar San Miguel, we use it. We use Caviar. We like it. What can I say?”
Alibaba Group Holding Ltd.: “I am not a recommender of any Chinese stocks. That said, if you had to own one, it would be Alibaba, which is an amazing company. I worry about the trade talks. A breakdown will cause a breakdown in Alibaba’s stock.”
Disclosure: Cramer’s charitable trust owns shares of Citigroup.
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