Taking a Deeper Look into Four Picks from Cramer's Lightning Round
Dr. Osman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
CNBC's Mad Money show is exactly what the title implies: a mad show. Jim Cramer, the host and former hedge fund manager, presents market insights and offers useful investing ideas. The “Lightning Round,” is certainly the most fun part of the show. During this part, viewers ask Cramer to make a call on several stocks. Cramer needs just a few seconds to decide on a rating. I believe it is worth taking some time looking deeper into his ratings. Here, I review four stocks discussed on the Nov. 13 Lightning Round:
First on the list is Qualcomm (NASDAQ: QCOM). Cramer was bullish on this one. So, am I.
Qualcomm is a world leader in 3G, 4G and next-generation wireless technologies. It holds an extensively licensed portfolio of CDMA technology-based patents. In addition, the company acts as a common denominator in the smart phone market. Its chips are used by the top handset manufacturers in the business.
Throughout 2012, the stock performed nicely by returning more than 12 percent. At the moment, Qualcomm is trading about 10 percent below its 52-week range of $68.30. Based on analysts' average mean target price it has at least 16 percent upside potential. Moreover, for 2013, EPS is expected to grow by 13 percent, indicating a rewarding outlook for shareholders. Overall, the company's year-to-date financial performance is robust marked by a significant improvement in revenues. Even though, free cash flow was negatively impacted by tax payments, the balance sheet reveals a strong net cash position. I expect the company to continue generating profit mainly due to its OEM agnostic business.
Cramer made a bullish call on Realty Income Corporation (NYSE: O) by saying he likes it very much. I have some doubts.
Realty Income is a publicly traded, self-managed real estate investment trust. As of the end of September, 2012, Realty owned more than 2,800 properties located in 49 states. The properties are leased to over 140 commercial enterprises across 44 different industries.
Realty Income is among the best-positioned REITs. Realty's cash-generating capacity allows it to pursue a competitive acquisition strategy. Moreover, it offers a comparably attractive dividend yield of 4.80 percent. My concerns derive from its current valuation metrics, which might indicate a case of overvaluation. Realty Income is trading with a considerably high PEG ratio and at a price that's more than 11 times sales. Nevertheless, over the last 5 years, it has provided stock traders with lucrative returns of more than 30 percent.
Next on the list is Exelixis (NASDAQ: EXEL). Cramer likes Exelixis. I do not agree on this one.
Founded in 1994, Exelixis discovers, develops and markets therapeutic solutions primary for cancer. The firm focuses on the development of cabozantinib, its most advanced solely-owned product candidate, in a variety of cancer indications. It has signed several deals with major industry players in order to build an expansive pipeline.
Over the last five years, the firm's sales grew by over 20 percent. Moreover, the stock is trading about 30 percent lower than its 52-week range of almost $7. Also, for 2013, EPS projections suggest an increase of over 160 percent indicating enhanced profitability prospects for the firm. Nonetheless, I believe that Exelixis's lack of variety regarding late-stage testing drugs is a serious disadvantage. Exelixis has a relatively unproven pipeline. This could be a setback to its overall performance as competition within the oncology market is getting fierce.
Cramer made a bearish call on SodaStream International (NASDAQ: SODA). I have mixed feelings about this stock.
Formerly known as Soda-Club Holdings Ltd, SodaStream is a leading manufacturer and distributor of home beverage carbonation systems. It sells its products within a wide network of 55,000 retail stores spread around 43 countries.
For the third quarter of 2013, SodaStream reported a remarkable 48.7 percent acceleration in revenues compared to last year. The company expects full-year of 2012 revenue to increase by 46 percent over 2011 revenue of $289 million. SodaStream appears to be in a great shape. Cramer rejected this stock primary due to its high volatility. He is right. However, the stock is trading with reasonable valuations. It has at least 43 percent upside potential based on analysts' average mean target price. Overall, I strongly suggest it is worth keeping an eye on it.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool owns shares of Exelixis, Qualcomm, and SodaStream. Motley Fool newsletter services recommend Exelixis and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!