Cramer: Low-priced stocks in contrast
Jim Cramer | email@example.com
Sprint was a $2 stock that everyone gave up on, a company that looked like it was going into bankruptcy because of its massive losses and incredible need for capital. Now, on the strength of excellent execution and sheer ingenuity by one of my absolute favorite CEOs, Dan Hesse, the future for Sprint looks incredibly bright--and that ugly duckling $2 stock is now blossoming into a $3.82 stock that I think can go much, much higher, in part because it is still hated by the analysts, many of whom will now be forced to upgrade it because of the incredible ongoing operating improvement.
Zynga, on the other hand, is part of an ignominious group of stocks, the second round of hyped Internet stocks, this time with the sexy social rubric attached to them, that have blown up in people's faces in a horrendous way. This $3 stock used to be at $15 and was much loved by Wall Street until today, when it reported a hideous quarter, losing 40 percent of its value as a slew of brokerage houses took it off their buy lists.
What the heck was it doing on their buy lists anyway? And how in heck could this company, which was guiding for earnings gains of $0.23 to $0.29, now say it could earn only $0.04 to $0.09?
We've got as little value added from the clueless Zynga analysts as we have had from the obtuse Sprint followers.
Sprint is in it for the long haul, in part because it is making much more money per subscriber now that it did just a few months ago, in part because it has embraced the Apple iPhone, and in part because it has the biggest bargain for its customers when it comes to data use. The rally in the common stock will help Hesse to continue to raise the capital he needs to transition his Nextel customers to plain old Sprint, because bond buyers, which had already embraced the turn, will lap up new high-yielding bonds that Hesse can issue.
Zynga? Look, as someone who is addicted to "Scramble With Friends," which I play with my daughter daily, I have learned to never pay for anything, and I so enjoy the "for free" aspect of this terrific game. Looks like I am not the only one who won't pay up.
I see this company wilting away, as that earnings trajectory seems to be pointing toward losses, not gains. Plus, the fade nature of games--remember "Draw Something" from OMG Pop?--makes this hit-driven business totally unpredictable.
So many stocks have been left for dead when they get to $2, recently including, Nokia, Alcatel-Lucent, and RadioShack. It's a rare bird that can come out of that $2 death trap. The unheralded Sprint is one of them.
Zynga? All I can say is welcome to the graveyard that your Wall Street cheerleaders didn't see coming. Those analysts should be so ashamed for their sins of recommendation that remind me so much of the first Internet wave that crashed on the shore, drowning just about everyone, including the analysts, who told us to come on in because the water's fine.
Disclosure: Cramer's charitable trust is long AAPL.