Mad Money - 04/01/25 | Audio Only

Key Concepts

• Tariffs and their potential impact on the economy
• Inflation and consumer sentiment
• GoDaddy's AI-powered tools for small businesses (Arrow)
• Enterprise software sector decline and potential reasons
• Generative AI's impact on the software industry
• Federal government contracts and their influence on software companies
• Sport Radar's role in sports betting and data provision
• Coreweave's IPO and subsequent stock performance

Tariffs and the Economy

• Main Point: President Trump's proposed tariffs, particularly a 20% tariff on almost all imports, could have a "horrendous" impact on the economy.
• Details:
  • Tariffs will likely be used as an excuse to raise prices across the board.
  • Many jobs meant to be protected by tariffs have already been automated out of existence.
  • The US may lack the capacity to produce goods domestically to avoid tariffs, leading to higher prices for American-made products.
• Historical Context: The Smoot-Hawley Tariff Act is mentioned as a historical example of disastrous tariffs that contributed to the Great Depression.
• Consumer Impact: Americans are already exhausted by rising prices and may react negatively to further price increases caused by tariffs.
• Political Angle: Voters may have expected Trump to lower prices, not mandate a 20% increase on imports.
• Collection Issues: Uncertainty exists regarding how tariffs will be collected, especially with immigration and customs enforcement focused on immigration.
• Canada: Questioning why Canada is included in the tariff plans, given its positive trade relationship with the US.
• Inflation: Most Americans are worried about inflation, not tariffs, which is what got Trump elected.

GoDaddy and Small Business Empowerment

• Main Point: GoDaddy is leveraging AI to help small businesses get started and scale more easily.
• GoDaddy Arrow: AI tool that helps customers with logo creation, website building, social media posting, and payment processing.
• Customer Base: GoDaddy has 20.5 million customers.
• Customer Focus: Shifted focus to higher-value customers who want to use a suite of products beyond just domain names.
• Process: Customers can describe their business idea in plain English, and Arrow will find relevant domain names.
• AI Partners: GoDaddy works with all the major AI companies to optimize its models.
• Stock Repurchase: GoDaddy has bought back 23% of the company since January 2022, showing commitment to the company.
• CEO Quote (Aman Bhutani): "The lifeblood of our economy is people starting their own businesses."
• Waltman Gogggins: GoDaddy spokesman and actor, uses Arrow for his business, goggginsgoggles.com.

Enterprise Software Sector Analysis

• Main Point: The enterprise software sector has been underperforming, with many stocks experiencing significant declines.
• Examples:
  • Adobe: Down almost 35% from its high.
  • Oracle and Salesforce: Down almost 30% from their highs.
  • ServiceNow: Down 32% from its peak in January.
• Reasons for Decline:
  • High valuations make them vulnerable in market selloffs.
  • Cyclicality tied to the broader economy.
  • Cautious guidance from companies during earnings reports.
  • Concerns about the impact of tariffs and consumer spending slowdown.
• Generative AI Impact:
  • New AI tools from companies like Adobe (Adobe Firefly) face competition from OpenAI.
  • AI could potentially reduce the need for software engineers in the long term.
• Federal Government Contracts:
  • Concerns about potential cancellation or downsizing of federal government contracts under a new administration.
  • Department of Defense canceled an Oracle contract.
  • ServiceNow has the highest federal revenue exposure (13% of revenue).
• Analyst Perspectives:
  • Keith Weiss (Morgan Stanley): Prefers margin expansion stories (Intuit, Autodesk, Workday) and cybersecurity names (Palo Alto Networks, Fortinet).
  • Jackson Ader (KeyBanc): Sees potential challenges for software vendors benefiting from government efficiency.
• Investment Strategy:
  • Be more selective in the enterprise software space.
  • Stick with leaders using AI effectively (Salesforce).
  • Avoid companies with generative AI threats (Adobe) or high federal government exposure (ServiceNow).
  • Focus on secular growth stories like cybersecurity.

Sport Radar and Sports Betting

• Main Point: Sport Radar is a key player in the online sports betting industry, providing data to sports book operators.
• Data Coverage: Covers over 1 million matches every year live and has a vast historical database.
• Key Sports: Tennis, soccer, and basketball are the most wagered sports.
• Partnerships: Works with major leagues, including the NBA and MLB.
• IMG Arena Deal: Acquisition that is expected to be margin accretive.
• Integrity Monitoring: Detects suspicious matches and gambling patterns.
• Financial Growth:
  • 26% topline growth and 33% growth in EVA.
  • Guidance for 15% average minimum growth over the next 3 years.
  • 700 basis point improvement in margin and cash conversion.
• CEO Quote (Carsten Koerl): "No sports betting if the integrity of the game is in danger."

Coreweave IPO and Market Sentiment

• Main Point: Coreweave's IPO was initially unsuccessful due to negative market sentiment, but the stock rebounded quickly.
• Initial IPO: Priced at $40, but fell to $37 before rallying.
• Market Sentiment: The data center sector was viewed negatively at the time of the IPO.
• Enron Comparison: Baseless comparisons to Enron were made, contributing to the negative sentiment.
• Rebound: The stock soared almost 42% to $52 shortly after the IPO.
• Underlying Value: The company is highly regarded within the data center industry.
• Kramer's Perspective: Believes in the company's fundamentals based on conversations with industry experts.
• Conclusion: The stock's performance was driven by emotion rather than fundamentals.

Lightning Round

• Royal Pearl Corporation: Kramer doesn't like it and suggests buying Home Depot instead.
• Finn B: Kramer gives his blessing due to the Chinese market being in bull market mode.
• Rio Tinto (RTZ): Kramer likes the call.
• Fattis (FDUS): Kramer is against it due to uncertainty about its holdings and potential impact from tariffs.
• Altria (MO): Kramer acknowledges it's a well-run company but doesn't want to recommend it due to personal reasons.

Synthesis/Conclusion

The video covers a range of topics, from the potential economic impact of tariffs to specific stock recommendations. Key takeaways include the need for caution regarding broad-based tariffs, the potential of AI to empower small businesses through platforms like GoDaddy, the challenges facing the enterprise software sector, the growth opportunities in sports betting with companies like Sport Radar, and the importance of fundamental analysis in volatile markets, as demonstrated by the Coreweave IPO. The lightning round provides quick insights on various stocks, reflecting Kramer's investment style and market perspectives.