In today's Daily Rundown, Jim breaks down the Salesforce.com (CRM) action and explains why the digital transformation story still has significant legs to it. Then he compares the selling in CRM to what has happened in the past to Home Depot (HD) , CVS Health (CVS) , Palo Alto Networks (PANW) , and Johnson & Johnson (JNJ) . It's why you have to let the sellers play out.
Katherine Ross: Hey, y'all, I'm Katherine Ross with Action Alerts PLUS. I'm here on the floor of the NYSE with Jim Cramer. Jim, we were just chatting about Salesforce. Now let's get more into the balance sheet, there, because we mentioned -
Jim Cramer: Okay, look. This is oodles with cash. Oodles of cash. And the company, you have to look at the free cash flow. And you have to understand that the way subscription accounting works, which we understand at TheStreet. He'll get a contract at the end of the year. But remember you can't recognize this. So it's one twelfth, one twelfth, one twelfth. And if you don't understand subscription accounting, you think that there's no cash, and it doesn't look good. But instead it's the opposite. I often say at TheStreet. Look, if you do advertising, and they give you a check. But the advertising market kind of went away because of Google. So Salesforce is doing much better than it looks. So you've got to look at the revenue growth, and the revenue growth does translate into earnings. But that's not how to look at it. The idea is game, set, match. He's trying to take all of the business from Oracle. All of the business from SAP. And people have to recognize he's winning.
Katherine Ross: And what about that 2023 guidance that we got?
Jim Cramer: I care more about 2023 than I care about the quarter. The headline writers don't. Stock goes down, people think something's wrong. They don't really know what Salesforce does.
Katherine Ross: That was one of the main questions that I got [crosstalk 00:01:15] on Twitter last night.
Jim Cramer: Continual theme. They don't understand. I mean, look. I go to Lamborghini. And I deal with the executives there. And they talk about how they use Salesforce for high end customers. Then I go to Brunello Cucinelli, and I talk with them. And they use Salesforce for high end customers. Bank of America, their app, everything ... The way that the touch that they have. Salesforce. Barclay's is now instituting it. Nine figure contract. Salesforce. Google, trying to get a little bit more customer sensitive. Salesforce. TheStreet. Trying to figure out how to get better in touch with subscribers, and target the right leads. Salesforce.
Jim Cramer: So, look, I happen to be a customer. We're a customer. And unless you're a customer, and when we were a customer, three CEOs ago, and the guy ripped it out. And I'm like, "Oh, are you kidding me?" He said, "Well, listen. We can't justify it." But we were under the cloud. You need Salesforce in an outfit like Alteryx, that I had last time, Alteryx, you need Tableau data.
Jim Cramer: You need people who can interpret data. And the reason why you need that, so you have ... Okay, let's just use something really silly. Let's say you own a gym. And everybody who's got a blue car is trialing, and all of the red cars, and the white cars, the black cars are trialing. Everyone with a blue car subscribes. Okay? So what you want is someone who interprets that pattern and says, "Oh, we should push the blue car people, they're the most likely to subscribe. So let's target on Instagram all of the blue cars."
Jim Cramer: Well, you don't know these things unless you have the Salesforce database. And you can ask Einstein, which is their AI, "What do we do? Should we go after this?" And a lot of people don't understand that you have a limited market budget, you're trying to find people on Facebook, that's where people write a check to, for Instagram. It's why Facebook's been up. And all you're doing is acting on what Salesforce tells you to do.
Jim Cramer: So it's a very powerful ... You don't have enough money to market to everyone. So you've got to target. And you've got to stay in touch. That's Salesforce.
Katherine Ross: And so-
Jim Cramer: And people don't know what it is, CRM. They don't know. They're not ... They don't own businesses. I have the ... I would love to bring Salesforce into Longshoremen. It's too expensive. But unless you have a small business, you don't understand what these companies do. All you just think they're some giant ETF. That's so stupid. I'm a little whimsical here, because ... but I'm also wistful, because I just wish people understood what they owned. But they're all like ETF, they don't ... It's in poor taste, different from ServiceNow which is different from TheStreet, from Salesforce. And it's very painful. I just want people to know what they own.
Katherine Ross: So Wayne was wondering should he buy Salesforce-
Jim Cramer: Wait until it's down again.
Katherine Ross: So you ... He wants to wait if- [crosstalk 00:04:08]
Jim Cramer: If the seller's going to destroy it again, he's going to destroy it, because they just say, "I don't want Salesforce on my sheets anymore. The stock's up. It failed to penetrate 166, the chart's bad. They lowered guidance for the first quarter." Which is not true. "And let's just go." And there's no discussion with the trader, like, "Well, maybe we ought to wait. There's buyers." "No, just go. I don't care. The business is bad." And that's what they do. And that's why in the piece in Real Money, I was saying, "You ascribe to the sellers this mythical brilliance. But look at the stock. Stock's up from five in 2007, 166. Has it been right to sell? If the stock is at an all time high, and it's up from five, is it right to sell?" And the answer is the revenues keep growing, and growing, and growing. It meets the targets. But the sellers are just ... They're idiots in the way they go about it.
Jim Cramer: They have every right to take profits. But they don't mind destroying stocks. Why don't they mind destroying stocks? Because they don't know what it means, anyway. What is that Salesforce? It's a stock that goes down. Well, what was it the other day? It's a stock that goes up. And you people at home genuinely believe that these sellers know more than the buyers. Except we bought Home Depot the other day. The sellers don't understand that we're coming up toward their own Black Friday. CVS. We've been dead wrong CVS, but why is my conviction level so high? It yields four, it's a great company, they own Aetna, Merlo reset expectations. It's going to earn six, let's say it earns six bucks. Well, it's selling at nine times their earnings, and I have conviction. I have convictions that I know what they do.
Jim Cramer: I know that Boeing, one out of every four planes goes to China, but they've won so many orders in the last month that they don't need China. It's because I do the homework. Now, the homework is an amazing amount of drudgery. Like do I really want to speak to say the CFO of Boeing about the granularity of the Vietnam War? But it's what I do. And I've got to tell you, the hedge funds don't do that. They just don't do it. Katherine, they don't care. They just say, "Ah, that stock's going down. Let's get rid of it. So Salesforce right now is going down. So let them get rid of it."
Jim Cramer: J&J was going down for a long time, off the Reuters. Get rid of it. They don't sit there and think, "Well, maybe Alex Gorsky's got a multi year plan to make J&J great." They say, "Get rid of it. Get it off my sheets. Get it off my sheets." And unless you've seen that, when the market rallied, that was a mistake. The market should be down. Let the sellers who have decided that there's no China deal, which is entirely possible because the Chinese economy's so weak, and who believe that there's a big rotation out of the clouds and into the lower, the Facebooks and the Alphabets, let it play out. And that's what I don't understand. People ... Take a look at what we did with Palo Alto. We let it play out and then we bought. Let it play out. It's what you have to do.
Katherine Ross: All right, Jim. Thank you so much for joining me.
Jim Cramer: Yeah, Katherine. It's just ... I'm not ... I like to ponder things in our videos, that's not produced. And I just am in awe of the lack of knowledge, how can there be, of why a seller comes in with a company with a good balance sheet that's historical at every level, there's been a seller of Salesforce. I remember when it was at 80, and Tableau data reported a bad number, and it didn't get the LinkedIn. LinkedIn didn't do well. And the stock dropped to $76. People talking about Microsoft buying it for $100. And then people told me it would never go back to $100, to that area, ever again. And everyone told me that, that I talked to, and they all said, "This is ... Jim, you've got to get on the right side of history." I was.
Katherine Ross: All right. You've got to get back to the office.
Jim Cramer: Yeah. Absolutely.
Katherine Ross: So thank you for joining me, Jim.
Jim Cramer: Thank you. Terrific.
Katherine Ross: Thanks for joining us, guys, we'll see you tomorrow.