The last time the market endured a major sell-off, those stocks ended up being the “cloud kings,” Cramer’s group of top-quality plays in the cloud-computing software space.
But lately, investors have been wary of buying shares in the cloud stocks, and for good reason: in October, the group got crushed after Federal Reserve Chairman Jerome Powell signaled an aggressive interest rate hike agenda that could have spelled trouble for high-growth areas of the market.
But now that Powell has seemingly reversed course and many of the cloud kings have reported much better-than-expected earnings results, Cramer said the outlook is brighter than people initially thought.
“[The] cloud stocks pulled back hard today, [but] … we know that business is just fine because — in fact, maybe better than fine — because we just heard from the companies,” the “Mad Money” host said.
“Now that the group’s getting hit again, I’m thinking Salesforce, which my charitable trust owns, … Splunk, which is in our bullpen, VMware and Workday, four cloud companies that we know — because they just reported — are in great shape,” he continued.
Cramer began with Salesforce’s earnings report. Last Tuesday, the enterprise-facing cloud giant issued what its CEO cast as one of its most successful reports, topping earnings and revenue expectations and impressing Wall Street.
Splunk followed suit on Thursday with a top- and bottom-line estimate beat and 40 percent year-over-year revenue growth. Management raised its full-year revenue guidance and its outlook for 2019.
“[Splunk’s] stock took off last Friday. However, it’s quickly been giving back some of those gains,” Cramer told investors. “At $105, I think Splunk is a good bet, although I’d like it even more at lower levels, which you’re probably going to get … because this market is very volatile.”
VMware, which has transformed itself into a cloud infrastructure play in recent years, also delivered strong earnings, beating analysts’ expectations, raising its full-year earnings guidance and revealing a healthy revenue growth forecast for the year ahead.
“The slowest and steadiest of the cloud kings,” VMware is a good pick for investors concerned that the other cloud plays are too volatile, Cramer said.
Workday, a company that helps businesses streamline their human resources, payroll, expense management and procurement operations using the cloud, also had a blowout quarter. A major billings beat, faster revenue growth and earnings that were double what analysts expected sent its stock soaring.
“Here’s the bottom line: the last time we had a huge, marketwide sell-off, the cloud kings got crushed. But you know what? It turned out to be an amazing buying opportunity because the fundamentals were still going strong,” Cramer said.
This time should prove no different, the “Mad Money” host said, but investors shouldn’t buy “all at once,” he said. “It’s too crazy out there, too volatile. But when these stocks get hammered, they do actually become very attractive investments.”
Disclosure: Cramer’s charitable trust owns shares of Salesforce.com.
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