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Jim Cramer Says Macy’s Inc. (M) Beat On Earnings But Missed On Revenue

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2 months ago

August 23, 2024

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Jim Cramer Says Macy’s Inc. (M) Beat On Earnings But Missed On Revenue

We recently compiled a list of the Jim Cramer Wants You to Watch Out For These 10 Stocks. In this article, we are going to take a look at where Macy’s Inc. (NYSE:M) stands against the other stocks Jim Cramer wants you to watch out for.

Jim Cramer noted that Tuesday’s pullback was expected as the market had been rising for eight consecutive days, and a ninth would have taken it into rare territory, a streak not seen since 2004. The session was tough, with the Dow dropping 62 points and the S&P falling 2%, almost like a 33% loss. This raises the question of whether the market still has the momentum to keep climbing, especially since bad news finally caused stocks to drop, something that hadn’t happened much during the recent 8-day rally.

“We were due for today’s modest pullback—the S&P had been up for eight straight days, and nine straight would have put us in rarefied territory. We haven’t seen that kind of winning streak since 2004. Today’s session was rough, with the Dow off by 62 points and the S&P dipping 2%, like losing 33%. We have to wonder if the market still has the momentum to go higher because today we got bad news, and guess what—stocks actually went down. That didn’t happen much during the 8-day gain.”

Cramer observed an unusual trend during this winning streak. If a company reported better-than-expected earnings, the stock surged. Even if the results were only slightly better than feared, the stock still went up. And if a company posted disappointing earnings, the market shrugged it off, assuming it was the last bad quarter because the Fed might soon cut rates, so people kept buying anyway.

“You see, we had a very odd pattern during the winning streak. It was a bit of Pangloss and a nip of Camelot. When a company reported a better-than-expected quarter, it was great. When a company reported a quarter that was just better than feared, the stock still rose. And when a company reported a bad quarter, we decided that it was the last bad quarter because the Fed was about to cut rates, so it was no big deal—buy anyway. In other words, companies could do no wrong, but not today. Today, we had a bit of a reckoning, a dose of reality.”

Jim Cramer observed that the market had been enjoying a stretch where good performance boosted stocks, and even poor performance was cushioned by the belief that the Fed would step in to help. However, after seven consecutive days of gains, he pointed out that this optimistic pattern might be coming to an end. The market has now reached a level where stocks won’t automatically get the benefit of the doubt. Cramer explained that we’re back to a more typical environment where strong stocks rise and weaker ones fall. At these elevated levels, it’s no longer enough to dismiss the bearish outlook with a simple “heads I win, tails you lose” mindset.

“We’ve reached a point where the market is sufficiently elevated, and we’re back to business as usual—where the good stocks rise, and the bad ones fall. At these high levels, we can’t just dismiss the bears with “heads I win, tails you lose.” There’s a return to rationality, and rationality is the enemy of a market where everything rallies indiscriminately.”

Our Methodology

In this article, we reviewed a recent post of Jim Cramer and his latest insights on what to watch in the stock market for Tuesday. We highlighted ten stocks he mentioned and provided details on hedge fund sentiment for each. The stocks are ranked based on the number of hedge funds that own them, from lowest to highest.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A customer in a store trying on fashionable apparel and accessories for purchase.

Macy’s Inc. (NYSE:M)

Number of Hedge Fund Investors: 44

Jim Cramer noted that Macy’s Inc. (NYSE:M) shares fell over 7% despite the department store chain surpassing earnings expectations. The drop was driven by a revenue shortfall and a lowered full-year sales forecast. In contrast, Bloomingdale’s and Bluemercury, which are part of the same retail group, are performing better than Macy’s Inc. (NYSE:M) according to Cramer.

“Macy’s shares sank more than 7% after the department store chain beat on earnings but missed on revenue. The company cut its full-year sales forecast. Bloomingdale’s and Bluemercury are doing better than the Macy’s nameplate.”

Macy’s Inc. (NYSE:M) is a strong investment opportunity because of its solid brand and loyal customers, which help drive traffic to both its physical and online stores. Macy’s Inc. (NYSE:M) has effectively combined its physical stores with its digital operations, creating a smooth shopping experience that meets changing consumer habits. This omnichannel approach is already boosting revenue through increased online and mobile sales.

Macy’s Inc. (NYSE:M) also owns valuable real estate in key urban areas, adding intrinsic value and offering chances to monetize underperforming properties. By expanding its private labels and exclusive brands, Macy’s Inc. (NYSE:M) is able to achieve higher profit margins and stand out in the crowded retail market. Currently, Macy’s Inc. (NYSE:M) is trading at a low price-to-earnings ratio compared to its historical averages and industry peers, and is currently undervalued. This makes it an attractive buy for investors who believe in Macy’s Inc. (NYSE:M)’s potential for growth and a successful turnaround.

Overall M ranks 9th on our list of the stocks Jim Cramer wants you to watch out for. While we acknowledge the potential of M as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than M but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Disclosure: None. This article is originally published at Insider Monkey.