Mad Money 10/22/25 | Audio Only

Key Concepts

Stock vs. Company: The distinction between a company's underlying performance and its stock price movement.
Profit Taking: A common market phenomenon where investors sell stocks after a significant rally to secure gains.
Data Center Economy: The sector focused on providing infrastructure and services for data centers, driven by increasing demand for electricity.
Real Economy: Businesses and industries that produce tangible goods and services.
Speculative Stocks: Companies with high growth potential but often lacking profitability, prone to volatile price swings.
Earnings Season: The period when companies report their financial results, often leading to significant stock price reactions.
Guidance: A company's forecast for future financial performance.
Margin Pressure: A situation where a company's profit margins decrease, impacting profitability.
Reshoring: The trend of bringing manufacturing and production back to the home country.
Meme Stocks: Stocks that gain popularity and experience rapid price increases due to social media hype rather than fundamental value.
Convertible Notes: Debt instruments that can be converted into equity.

Market Analysis and Stock Performance

The market experienced a downturn, with the Dow tumbling 334 points, the S&P sinking 53%, and the NASDAQ losing 0.993%. This decline, despite an earlier recovery, highlights a sentiment that many stocks have become overvalued after a strong rally. A key observation is that when companies report excellent quarters but their stock prices fall, it indicates a disconnect between the company's performance and its stock valuation, not necessarily a problem with the company itself.

GE Vernova (GEV)

Main Topic: Analysis of GE Vernova's earnings report and stock reaction.
Key Points:
- GE Vernova, General Electric's former power business, is crucial for energy supply to data centers, manufacturing gas turbines.
- The company reported strong order growth, driven by its integral role in powering data centers, which are "gigawatt consumers."
- CEO Scott Strassic provided a positive outlook, though he did not raise full-year estimates.
- A potential partnership with OpenAI was hinted at, which has historically boosted stocks of companies like AMD, Broadcom, and Nvidia.
- Problem: GE Vernova's stock was already up nearly 80% year-to-date. Despite strong order growth, the lack of raised full-year forecasts led to a significant sell-off, with the stock dropping 50 points from an initial pre-market indication of a 25-point gain.
- Argument: The stock's price had already anticipated the positive news, and the market demanded "more" than just strong order growth.
- Conclusion: "Stock wrong, company right." The company is fundamentally sound, but the stock was overextended. The stock recovered most of its losses, finishing down only $9 on a $56.76 basis, indicating underlying strength despite the short-term reaction.

Vertiv Holdings (VRT)

Main Topic: Analysis of Vertiv's earnings and stock performance.
Key Points:
- Vertiv, a data cooling center company, had a stock that was up 54% coming into the quarter.
- The company reported "shockingly great numbers," with organic orders up 60% year-over-year and 20% sequentially.
- Management provided excellent guidance for the current quarter and raised full-year forecasts.
- Problem: Despite the exceptional results, the stock opened up 10 points and then plummeted 20 points.
- Argument: The market expected a "monster quarter," and while Vertiv delivered, it wasn't a "super duper monster quarter" that would justify further upside given the stock's prior run.
- Conclusion: Similar to GE Vernova, the stock's prior appreciation meant that even outstanding results were not enough to move the stock higher. The company is strong, but the stock was already priced for perfection.

Intuitive Surgical (ISRG)

Main Topic: Contrasting Vertiv and GE Vernova with a strong performer.
Key Points:
- Intuitive Surgical was the best-performing stock of the session.
- The company reported strong double-digit co-procedure growth (up 16%).
- A key driver was "after-hours use," leading to greater leverage of fixed costs.
- Argument: This acceleration in procedure growth was unexpected, leading to a nearly 14% rally in the stock. This demonstrates a scenario where positive surprises drive stock appreciation.

Texas Instruments (TXN)

Main Topic: Impact of margin pressure on stock performance.
Key Points:
- Texas Instruments experienced a significant stock drop of 10 points (5.6%).
- Reason: The company guided down due to margin pressure, indicating it was making less money per product.
- Outlook: Buyers are not expected to support the stock anytime soon.

Three Economies Framework

Jim Cramer presents a framework of three economies:

Data Center Economy: Stocks like Vertiv and GE Vernova struggled despite strong fundamentals, indicating they were "broken stocks" due to prior overvaluation.
Real Economy: Businesses in this sector performed well.
- Example: Capital One (COF), a credit card company, rallied nearly $4 after reporting a dramatic decline in credit problems, a "textbook example of a stock rallying off of a real shocker."
Speculative Stocks: This sector continues to face pain, with many companies taking advantage of high stock prices to raise cash due to a lack of funds. Insiders are selling, and seasoned investors are exiting due to "meme stock behavior."
- Argument: Speculative stocks are unlikely to return to their previous highs and may head for new lows. While bounces may occur to lure investors back, the "destruction of the fraud" makes a full recovery difficult.
- Actionable Insight: Cramer urges investors to "trim the stocks of companies you own that are losing fortunes" and those that "will have to sell huge slugs of stock in order to keep operating."

Company-Specific Discussions

PayPal

Main Topic: Investor inquiry about PayPal's new CEO.
Argument: The new CEO needs to start delivering numbers. Without tangible results, the stock's performance will remain uncertain.

ADP

Main Topic: Investor inquiry about ADP.
Key Points:
- ADP has been a tough stock to own recently, trading down from $329 to $283.
- Negative research is beginning to emerge.
- Argument: Despite recent weakness, ADP is an "excellent company," and Cramer advises to "stay put." He also likes Paychex.

Thermo Fisher Scientific (TMO)

Main Topic: Analysis of Thermo Fisher Scientific's earnings and future prospects.
Key Points:
- Thermo Fisher reported a better-than-expected quarter with a "nice top and bottom line beat" and accelerating organic revenue growth.
- The company has been range-bound for the past few years, and this quarter could be a catalyst for a breakout.
- CEO Interview (Mark Casper):
  - Strong Performance: Delivered 5% topline growth in Q3, with improving end markets and a strong competitive position. China, though a challenged market (7% of revenue), showed strength in farm and biotech.
  - OpenAI Collaboration: Working with OpenAI to co-create solutions for improving drug development, reducing costs, and shortening timelines. This collaboration offers hope for breakthroughs in neurodegenerative diseases.
  - Neurodegenerative Diseases: Through acquisitions in proteomics, Thermo Fisher is launching new capabilities to advance research in Alzheimer's and Parkinson's.
  - Ecosystem Power: Thermo Fisher provides tools to pharmaceutical companies, biotech firms, and academic researchers, investing over $1.4 billion annually in R&D.
  - Reshoring: Making significant capital investments ($1.5 billion) in US pharmaceutical manufacturing, benefiting from clients reshoring their medicines. Acquired a site from Sanofi to expand US drug manufacturing capacity.
  - Sventum Acquisition: The acquisition of Sventum's filtration and separation business is a "hand-in-glove fit" with their bioproduction business, which is their fastest-growing segment. This acquisition is off to a great start and is expected to deliver cost and growth synergies.
- Outlook: Cramer believes Thermo Fisher has a "great flight path higher" after navigating challenges like COVID and China.

Netflix (NFLX)

Main Topic: Analysis of Netflix's post-earnings stock plunge and potential buying opportunity.
Key Points:
- The stock plunged roughly 10% after a "poorly received quarter."
- Argument: Cramer believes this sell-off is an "overreaction" and presents a "terrific buying opportunity."
- Quarterly Results:
  - Revenue was inline (up 17.2% year-over-year).
  - Operating income was shy ($5.87 per share vs. $6.96 expected), facing margin pressure.
  - Cash flow numbers were phenomenal.
  - Revenue outlook for the current quarter was higher than expected, but earnings outlook was inline.
  - Full-year operating margin forecast was cut.
- Key Issue: Most of the earnings softness was due to a $619 million tax dispute with the Brazilian government, a one-off item that Netflix had warned about. Without this charge, Netflix would have had a "monster earnings beat."
- Management Statement: CFO Spencer Newman stated the Brazilian tax matter is not expected to have a material impact on future results.
- Other Concerns: Analysts quibbled over light results in Latin America and Asia Pacific, and a perceived lack of an AI strategy or dismissiveness of YouTube competition.
- Shift in Metrics: It's harder to judge Netflix since they stopped reporting subscriber metrics and average revenue per user, leading to overreactions when quarters aren't perfect.
- Positive Aspects:
  - Had the most successful movie of all time ("K-pop Demon Hunters").
  - Accelerating revenue growth (17%) driven by membership growth, price increases, and higher ad revenue.
  - Operating margins are improving year-over-year (low 30s vs. high 20s).
  - Fourth-quarter margin forecast of 24% is still an improvement from 22% last year.
  - Excellent engagement, achieving highest quarterly view share in the US and UK.
  - Strong content slate (Wednesday, Happy Gilmore 2, Bonap Petite Your Majesty, Canelo vs. Crawford fight).
  - Upcoming Q4 content slate includes Stranger Things, The Diplomat, A House of Dynamite, and Knives Out 3.
  - New TV user interface is well-received.
  - AI and machine learning are being used for content recommendations and cost savings.
  - Rapidly growing advertising business is performing well, with potential for price increases and a virtuous cycle of driving users to the ad-based tier.
- Valuation: Trades at less than 35 times next year's earnings estimates, with expected 26% earnings growth. Cramer suggests it could trade at 50 times earnings.
- Conclusion: The stock's 10% drop is an overreaction, especially given it was already down significantly from its highs. The core business remains strong, and the Brazilian tax issue is a one-off. This presents a "terrific buying opportunity."

Warner Brothers Discovery (WBD)

Main Topic: Investor inquiry about Warner Brothers Discovery.
Advice: Hold on to the stock. Cramer believes CEO David Zaslav can get the stock to $24-$27 from its current $20.

Vertiv Holdings (VRT) - Revisit

Main Topic: Further discussion on Vertiv's stock performance.
Key Points:
- Vertiv reported a "blowout quarter" with a big top and bottom line beat, organic orders up 60% year-over-year and 20% sequentially.
- Management provided excellent guidance and raised full-year forecasts.
- Despite opening higher and hitting a fresh all-time high, the stock reversed and finished down almost 2%.
- CEO Interview (Gio Albertazzi):
  - Extraordinary Growth: Confirmed the strong quarter across all metrics and expressed pride in market share growth and backlog (up 30% year-on-year to $9.5 billion).
  - Long-Term Trajectory: Emphasized focusing on the long-term trajectory rather than daily stock movements.
  - Innovation and Scale: Vertiv is not afraid of innovation and new technologies, driving advancements in the rapidly evolving data center industry. Scale is important, but they are at the forefront of evolution.
  - Great Lakes Acquisition: This acquisition strengthens their portfolio in the "white space" (where IT resides) and completes their offering in power and thermal management.
  - Customer Relationships: Works with end-users, contractors, hyperscalers, and installers. Their strength lies in partnerships with hyperscalers, new clouds, and silicon providers.
  - Business Substance: Sees significant business in the pipeline and in high-level conversations with major players. Announcements take time to roll out.
  - Heat Generation: Heat generation comes from electronic components, not just copper. Liquid cooling and its evolutions will be crucial. Vertiv is at the center of industry transformation.
- Conclusion: Cramer reiterates that Vertiv is the "gold standard" for data center cooling and will benefit from continued build-outs. The stock's pullback is attributed to "pure run-of-the-mill profit taking" after a 54% year-to-date gain.

Lightning Round

This segment features rapid-fire stock recommendations.

MTTN (Mountain): Cramer likes the stock at $20 and still likes it at $15, despite being wrong on it previously. He believes it's a good company.
Constellation Energy (CEG): Cramer acknowledges it's a good company making a lot of money but is afraid to recommend buying it at its current high price.
MVST: Cramer likes this stock because it has great free cash flow and actually makes money, distinguishing it from purely speculative stocks.
Uranium Energy Corp (UEC): Cramer advises against buying uranium companies, stating they are up too much and nuclear power plants take too long to build.
Bill Holdings: Cramer recommends buying Bill Holdings, citing a positive interview with Jeff Smith of Starboard and the addition of four new directors.
AS Space Mobile (AS Spacemobile): Cramer advises against it. The stock is up over 200% for the year but down from its recent high. It has significant negative free cash flow and is offering convertible notes and shares.
Trilogy Metals: Cramer advises against it. The stock is up significantly but has no sales and has been losing money for years.
Grail: Cramer is intrigued by the technology but advises against buying. The company has been losing hundreds of millions of dollars, and despite a recent stock spike and private placement, it's a speculative play.
Techcogen: Cramer finds it speculative but likes it. The stock is up significantly but has never turned a profit. He prefers Vertiv as a more solid alternative.
Aurora Innovation: Cramer advises against it, suggesting buying Tesla on weakness instead. Aurora has never made money and has lost hundreds of millions of dollars.
Rigetti Computing: Cramer advises against it. The stock is up, but revenues are declining, it's losing money, and there's heavy insider selling.

Conclusion and Takeaways

Jim Cramer emphasizes the importance of distinguishing between a company's fundamentals and its stock price. He warns against speculative stocks that have seen parabolic moves and are reliant on raising capital, suggesting that the "mania" for such stocks is ending. He reiterates his advice to "trim the stocks of companies you own that are losing fortunes."

However, Cramer also highlights opportunities in companies with strong fundamentals, even if their stocks have pulled back. He sees potential in data center stocks like Vertiv and GE Vernova once their valuations normalize. He also points to companies in the "real economy" like Capital One and excellent companies like ADP and Thermo Fisher Scientific.

For speculative investments, Cramer advises caution and a focus on younger companies with a clear path to profitability. He suggests that while speculation can be rewarding, it must be done wisely, and investors should be prepared to sell on bounces for overheated speculative stocks. The current market environment, with the end of speculative mania, presents opportunities for astute investors to identify higher-grade alternatives and buy into solid companies at more attractive prices.