Mad Money 07/30/26 | Audio Only

My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Crra America. Other people make friends. I'm just trying to make a little money. My job is not just to entertain, but to educate, teach, explain how this stuff happens. So call me 1 800743 CBC. Tweet me at Jim Kramer. Everyone assumes that stocks rise or fall with the fortunes of the companies they represent. Sometimes that's even true. But at other times the two diverge and stocks become hostage to the fortunes not of their own companies but of the shareholders. We are seeing that happen right now at this very moment. And it's a little nerve-wracking. Of course, you can't tell from the averages. Dow gaining 614 points. S&P jumping 1.7%. NASDAQ surging 2.8% today. >> But the shares of some huge tech companies were recently dragged down by a flailing hedge fund that controls something like $45 billion worth of stock, much with borrowed money. You may not have heard of the fund, situational awareness, or the boy wonder who runs it, Leopold Ashen Brener. But the unraveling of this hedge fund royled the entire complex tech down big because of it. Boy wonder no more. His selling and the selling by the firms that borrowed that that lend him the money. Well, they caused gigantic declines in stocks over the last few days that should not have been going down. Many sprung back to life today and gave fur I've got to tell you because they were so depressed. I think they have further to go. How does this happen? I mean, really. I mean, how does something behind the scene like this just happen? As a former hedge fund manager, I can tell you how it does because I've been involved in it. I've seen it. See, brokers really want your business. One way to get it is to lend you money. I've had that happen. Say, "Here, Jim, take millions." The manager of this fund had a hot hand originally, and when you have a hot hand, investors were throwing money at him, and brokers are always eager to lend money to new superstars. This phone was apparently able to borrow a gigantic amount of cash recklessly. I think $3 for every $1 they put up. That's perfect when your stocks go up. But it is the kiss of death when they come down. In this case, they went down big smooch of death. For months, I heard about this situation awareness. No, situational unaware situal wait situation awareness fun. And I heard that it could do no wrong. Absolutely no wrong. Everything Leopold Ashen burner touched turned to gold. He mostly touched the semiconductor stocks along with the memory and data storage power companies and he loved the Neoclouds. Oh, he and he despised software. He bought the memory players with the same gusto that he shorted the software stocks. At some point this year, I thought this guy's view was all that mattered to host of both big- time people and smaller time speculators. When you're as good as Ashton Brener was, you get a lot of copycats. This guy had a bunch of camp followers who also ran billions of dollars and also borrowed a ton of money. Lots of other funds simply mimicked him as did many individuals. They didn't want to be left behind. As is often the case with a younger manager with a just steaming hot hand. Asher Ber apparently didn't believe that anything ever go wrong that he did. He he didn't seem to realize that when stocks go down and you bought bought them with margin money, the brokers aren't going to lose money on you. You either pay them or they forcibly sell the stocks you bought with borrowed money. Raise money to pay them or they sell them out from underneath you. It's brutal. It's self-fulfilling. So when things go wrong, they go spectacularly wrong. Ashen Brener and his imitators bought the big semiconductor Micron Sanders Intel. He like the companies that built data centers got coreweave nebas and he had a thing for Bloom Energy which makes hydrogen fuel cells to power the data center. Now you need to know a couple of things. Many of the people who bought these stocks really didn't know anything about them other than this guy had them. They just knew Ashen Breader was an ace and he'd been dead bread for so long they well they had to pile in. The irony here is that when tech had just had a bit of a downturn, just a smidge, Ashen Breader apparently lost almost all the money managed despite excellent earnings performance of the actual companies themselves. That's why I say they diverge. The good news is simply they stopped translating into higher stock prices for a variety of reasons. Maybe because rates were climbing. Maybe because not every company did well or because they went out of fashion the Wall Street fashion show or buyers turned to other kinds of technology as I've been saying they're doing plus these stocks do tend to trade with each other considered a contagion something I don't think Leopold thought about or was old enough maybe to realize the contagion spared almost none of the stocks of these companies even as the fundamentals remain very very strong at the same time Asher was a serious short seller and he bet against the enterprise software companies like there was no tomorrow Adobe Workday Salesforce so again we got self-fulfilling moves down as he was mimicked con consistently when the stocks turned. He apparently didn't take the emergency actions that you need to do the things I've been telling you to do for weeks. He didn't sell the data center place and get off margin. Instead, he wrote his investors on July 24th, 6 days ago, that it was really a terrific time to give me more money. So, what happened? Well, they didn't give me more money. I'll tell you that much. Uh consider what uh a stock that if you're a member of the club, you know was causing me tremendous angs. Consider Intel. We got an earnings report from Intel last Thursday night that was a thing of beauty. Not only were there no flies on it, but Lip Boutan, the CEO, the CFO and I and I talked for a long time about the incredible multi-year story of demand for Intel CPUs. Intel's foundry business is great. Well, will be great. Intel's semiconductor packaging division. I like it. We told members of CMC Investing Club that this was such a great opportunity to buy in a note we sent out Thursday night. Well, the stock roared from the high 90s where it had been trading to as high as 110 and after hours when the earnings news broke. I was ecstatic. We nailed this one. I certainly didn't think it would stop at 110. I thought 120 next stop. But that next day, unbeknownst to us, big mouth investors got that letter from Ashen Brener asking for money from investor to to meet the margin calls. Right from the get-go, Intel stock could not get an uptick. It just came down and down and down and down. And it was astonishing to those of us who knew how good the fundamentals were, including big people as the company, well, behind the scenes, it looked great. Ashton Brener's fund was furiously selling Intel to raise money, though, and the brokers he owes that money to were doing the same thing. The imitators were certainly bolting from Intel, too. It didn't matter how good Intel's quarter was. The result, the stock sliced through $100 and didn't stop into the low 90s about an 18 point swing when I thought it would be the opposite. I thought it would go up 18 points, not down. I couldn't believe I could be that wrong. Turns out I wasn't. Ashton Banner and his minions didn't want to sell, but the margin clerks forced him to sell, and that crushed the stock. His funds meltdown did create an amazing opportunity to buy Intel. The selling seems to have dried up for now. I think it's going to stay dried up because the only people really want to get rid of it were his people. Now that Ash's out of the picture, we can go back to analyzing stocks as pieces of the companies they represent. Last night, for example, Microsoft reported a terrific quarter and soared higher. Meta not firing on all cylinders. Tonight, we heard from Amazon and Apple. Amazon shot the lights out. It was like Microsoft last night. They reported a solid revenue beat. Terrific operating income up 43% year-over-year or almost $4 billion higher than expectations. I normally talk about the earnings, but this time they include a massive gain from Amazon's investment in Anthropic. So, they're not really apples to apples. What matters most here is that Amazon Web Services put up nearly 37% growth, a dramatic acceleration from 26% last quarter. I remember a couple quarters ago when it was under 20. Wow. Their margins were terrific. They're making big money from AI. This is the same kind of cloud infrastructure business that made a fortune for Microsoft. And that's why Amazon caught fire in after hours trading. Astonishing gain and I don't think it's done. As for Apple, after roaring higher for most of July, it reported a slight earnings beat. When you exclude the impact of tariff rebates and a slight revenue beat, the stock still got hit. Despite strong iPhone sales, their services division came in weaker than expected, as did the Americas. And they don't sound that confident about their margins bouncing back because of of well, memory prices. It just seems like that. Well, let's put it this way. It's doing good, not good enough after that stock run. Apple spent most of July cruising steadily higher. So, it did come in too hot. I suspect more profit taking than we got even tonight. Still, let's not forget the big picture. You know that there's a gigantic takeaway from what happened here. For two weeks, I've been telling you to get off margin. Tweaks I come out here every night and say it. Stop using borrowed money. I didn't want you to get caught up in some overleveraged hedge fund was doing. I didn't want you to get blown out. Bottom line, I want you to remember what happened here. Understand that while ashener is a spectacular flame out, these kinds of things happen with some regularity. I don't want them to happen to you and I don't want you to be misled by it. This business is hard enough. You don't need margin to make it all that much harder. That said, the margin of selling has created tremendous opportunities now that I think all the force selling is finished and the price is right. Let's start with Cordell in Ohio. Cordell. >> Hey, good evening, Jim. >> Good evening, Cordell. What's up? >> I currently work for one of the biggest retail employers in the United States. And I was wondering is I noticed that this company stock was down uh flat today and it went back down to its normal uh pricing. And I was wondering is Ed Decker and Home Depot the right company to uh follow? Okay, I got to tell you right now. Look, right now Lowe's is doing better than Home Depot right now because we're going to have probably have rate increases, not rate cuts, but I'm going to be wrong on owning Home Depot. Why do I own it? Because a great American company can be owned at a lower price than I expect. And I have patience. I tell people who own Home Depot who are in there with me, be patient. It will work. Not now, though. Don't expect it to. Chris in Florida Chris. >> Booyah. Jim, this is Chris from Orange, Florida. >> Fantastic. >> I'm a first time caller, >> longtime follower and club member. >> Thank you for all you do for to help us individual investors. >> Thank you, man. People still get the book. You join a club. I think you guys should join the club. We had some really good calls lately and now this intel is going to be our biggest. Trust me. What's it up? >> I love I've read all your books. I love your latest book. Thank you. >> Thank you, man. >> My question my my question is on Netflix. I have owned this stock for many years and it has been a very good investment. This year however has been a messy one as you know with the stock down 22%. I know you always say to focus on where the stock is going and not pass performance. Jim, should I sell Netflix to buy a stock? >> No, don't sell it down here. I think Netflix can bounce. I really do. Don't sell it. I mean like that would be just plain wrong. You know, one day what's they're going to do is they're going to come on this show. Ted's going to come on straight. He's going to sit right here and we're going to discuss why it's a great company. Or well, don't sell it yet, but I ain't got much more to say about it. The market is complicated enough without borrow money. Skip the margin. Don't you think Liupold wish he had? Hey, buddy. Tonight, after a rocky reaction to his pre-announcement, IBM has now reported its latest quarter in full. Hey, how's Wall Street taking it? I'm getting a full picture of the company. You probably want to know because maybe it's not as bad as you think. Then Jersey Mike came public today. I like their stuff. But should you take a bite? I take a close look at whether the sandwich stock cuts the mustard. You think I wrote that? And then I'm going to sit down with Sio Blackberry after this one's had such a comeback. You're going to want to own that stock. I know you're probably buying it right now. Could you at least wait to hear what he has to say? This was the longest a block in history. Stay with Kramer. Don't miss a second of MadMoney. Follow Jim Kramer on X. Have a question? Tweet Kramer #madmentions. Send Jim an email to madmoney@cnbc.com or give us a call at 1800743CNBC. Miss something? Head to madmoney.cnbc.com. Okay, earlier this month, IBM pre-announced an earnings shortfall. You probably know that their customers were prioritizing other types of tech investments over their offerings. Stock did plunge 290 to 217 single session. Unfortunate, but I still think this company's got a lot going for it, including the most legitimate quantum computing business out there. Today, IBM and some of its partners unveiled three separate admin demonstrations, really exciting stuff, of quantum advantage, overcoming some of the field's longstanding challenges and proving this technology can do things that ordinary computers just can't, maybe never can. That's why we want to take a closer look with Arvin Krishna. He's the chairman, president, and CEO of IBM to learn more. Mr. Christian, welcome back to Mad Money. >> Always a pleasure to be here with you, Jim. >> Thank you, Arvin. It's great to see you. I know you've got some very important announcements, but first I'd just like to start with a simple thing. What is the quantum advantage that IBM offers? >> Quantum advantage means that a quantum computer can do things better, either faster, cheaper, in a way that normal classical computers cannot get to at this time. >> Now, you've got three announcements. I want to start with this IBM University of Chicago announcement. And I think it's very important because um it it's you solve the computation that could not otherwise be solved. >> Correct. So this is a problem that is well known in computer science. It is called random circuit sampling RCS. And so it's a one that computer scientists and math people use as a test for how hard is the problem. So you so they have one which cannot be solved by classical computers and up to a certain scale our quantum computers could do it. The other thing is if the quantum computer does it but you can't do it with others, how do you know you got the right answer and so they figured out that also incredibly brilliant faculty at the University of Chicago on this one. >> All right. So in other words, we can actually verify it otherwise it was intractable. We would not know if it was right >> if it is it right or is it wrong. >> So that's really important to do both. Solve something hard but also find a way to say am I in the right zip code or am I not? Okay. All right. Now, how about this uh breakthrough with an Israeli quantum computing startup uh that involves using quantum computers to explore the physics of materials. To me, this would mean that we could discover materials that with that all the researchers, let's say, at a Dupontine could never find. >> That's correct. So, in this case, they're trying to figure out materials in real life are not perfect. If they're perfect, maybe you can predict their properties. So, like batteries, electrolytes, and they figured out how these materials behave when they're imperfect. And they also then figured out a way to say am I in the right zip code or am I not given I cannot solve this problem on other forms. So that's again >> but that would mean what for instance we wouldn't there probably materials that we think would work if we went to Mars that wouldn't maybe we can find ones that would work >> or maybe we can double the capacity of a battery >> right well that would be fantastic we know that would change everything especially the environment. The last one algorithmic announcement class verifications are unavailable. Toughest one for me to understand Frank. I didn't I you have to help me with that one. >> So actually let's make it simpler. Some of the math on these problems is understood. It just turned out to be impossible to do. So in this case they were trying to figure out that if you apply energy let's say light waves into a material how does it behave? And the quantum computer discovered that the material gets into oscillations and gets into other things that no other technique had ever gotten to. And they tried hundreds of other techniques. What that tells you is maybe we can discover a material that has better magnetic properties. >> Okay, >> that is a very practical problem that we could go solve or maybe we could discover a way to have a plasma for a possible fusion nuclear reactor. And that's the second one that is really interesting. Or maybe we can find a drug to inject into your body that if you apply light, it acts and if you don't apply light, it doesn't act. >> Well, would people be listening to you and uh companies that really want to do this contact you or or would the secretary of energy contract you contact you? These are things that are so necessary right now >> actually. So, we're well in conversations with Department of Energy and with Chris and I think that these are exciting things. We're very happy actually that they're funding lots of companies because I think at this moment it's important to forment competition and to create an ecosystem but uh I really am excited by the conversation. >> Well, I love this is that you you introduced me the concept of UBS using the bond market using these. But that's you know to me that's terrific. That's a very niche use. These are actually broader uses which brings me to the idea that now you're starting to talk about EPS someday in the near future. Does that seem plausible? >> I think that in 2028 or 29, you'll see it have a measurable impact on our top line and bottom line. >> That that's a very big statement. >> That's two to three years away. I'm giving ourselves one year of flex there, but not that far. And by the end of the 2030s, we are now pretty convinced this is a trillion dollars of value. >> Trillion dollars. >> Trillion dollars of value by the end of the 30s. >> Okay. Look, you're deep deep in it. Uh, let me give you something that I'm concerned about. Uh, I have some crypto. When I think about the equations that people tell me could never be cracked to get to my crypto, I it sounds to me like the University of Chicago announcement. Should I be more careful? >> I think that you should give yourself three or four years and at that point I would get rather paranoid about it. >> Really? Three or four years? That's not that long. >> No, that's not that long. Okay, people should listen to that. I know a lot of our viewers have it. That's that is uh disconcerting. Um I do want to get to light well, but I do want to just check check in with you. I know that it's not it's difficult to talk about a period after you've announced something and there was an excellent article about how forthright you were about about shortfall. anything you can say to us about how yes that was a moment in time and you're glad that that's passed you because there's some good things that have happened because I know that some of the costs that people have had even Apple's talking about the DRM being a 100redyear flood are we doing okay >> I think we are doing okay the semiconductor I'll call the semiconductor price increases are real >> I I actually don't believe they'll actually go away at least for the next couple of years maybe in two years but likely they're staying with us >> so We got capex deals deferred. Here's the good news. About 40% of them have already closed in 3 to 4 weeks. We would have thought that might have taken 3 months, but they actually already closed. That's a good signal that it is a deferral, not a destruction. >> Okay, I like that. I do want to give you a chance because it's something you're doing that's good for 185 of the world's top research universities. Lightwell, something that we think we we know about some of these models. They're they're potentially dangerous. you're trying to help. >> We are. So you've talked a lot about Mythos and Mythos is quite real and the danger of Mythos being able to find vulnerabilities and letting people exploit them is real. >> When it's proprietary code, the vendor who provides it should go fix it. If it's open source, which is widely used, the majority of the world uses it. Lightwell is a is our offering that can patch all open source. We believe that universities where a lot of this comes from deserve to get this for free to order to protect their faculty, their students and the research they do. So we are making a commitment that for the 185 what are called R1 or the top research universities in the country, we will give it to them gratus with nothing expected back. >> Well, that's that's the IBM way that I've come to know and I want to thank you so much for your forthrightness. Now, I don't know if I want to thank you for the crypto announcement because I think that actually bigger news than anything I've heard on our network today. I want to thank Arvin Krishna, president, chairman, and CEO of IBM. Arvin, it's so great to have you. >> Coming up, should you take a bite out of Jersey Mike's after its debut on the New York Stock Exchange? Kramer's digging into the numbers next. This was a tough moment to come public. So, it's no surprise that when Jersey Mike Subs debuted on the NYC, the stock opened at $21, down two bucks from the IPO price before ending the day at $21.63. I know it was a bit of disappointment for all the great bell ringers who were here, but I got to tell you, given how oversubscribed this IPO was, I think it may actually make for an excellent buying opportunity. Yeah, I think it's good news. Jersey Mike is frankly a great story. The sandwich chain has 3,378 locations across the US and Canada. Vast majority of them being franchises, something like 99% of them. In late 2024, the then private company was acquired by Blackstone private equity for $6.3 billion. And now Blackstone's ringing the register by bringing it public. Take advantage of the fact that this chain's very popular. You know, last month Jersey Mike's was included in the American Customer Satisfaction Index restaurant and food delivery study for the first time and it debuted as the highest rated quicks serve chain in America, unseeding Chick-fil-A, which had been ranked number one for the previous 11 years. The food is even great. Look, as a even as a Philadelphia, I got to bet they make a pretty good cheese steak, but I live in New Jersey now. Maybe that's why. Maybe the best part of this whole story is that Jersey Mike's has a franchiseheavy business model like Kramer fave Yum that lets them grow like a weed. They make their money primarily from royalties and franchisee contributions to the company's advertising fund along with supplier program payments, upfront development, franchise fees, technology fees, and profits from the three dozen scores that are actually company owned. Last year, the cash on cash returns for running a franchise came in at 42%. So, it's no wonder they're popping up all over the place. That's a good business. I could use a couple of these. Just as important, Jersey Mike's had 20 consecutive years of positive same store sales growth. There were some bad years in those 20. Last year, their same store sales were up respectable 3.2%. Dipped to 2.0% in the first half of 2026. Now, it would like to to I'd like to see that stabilize obviously or even improve a bit. Company's average unit volume, AUV they call it, has grown steadily over the past two decades, just under $1.4 million. Management believes that they can do $2 million per unit with its asset light franchise focused model. The overall numbers look pretty darn good. Systemwide sales have risen at a 20% compound annual growth rate over the past 20 years. That's superb. Last year alone, systemwide sales uh up about 13%. As for Jersey Mike's total revenue, it's risen at a 16% compound annual growth rate over the past four years and stood at $724 million since 2025. up about 11% from 2024. Their earnings for interest, taxes, depreciation, and amization were up 25% last year with their EVA margin rising to 47% from 40% in 2024. Needless to say, that's translated to a huge increase in earnings. This business is incredibly profitable. Seems like the private equity guys at Blackstone knew what they were doing when they picked it up. Speaking of that private equity ownership, this is something I usually worry about when we're talking about an IPO because it can create a huge overhang that acts as a damper and often does. Blackstone did sell some of its position in the IPO. Of the 43 million shares sold in the offering, nearly 30 million shares came from Blackstone, but the firm still owns roughly 30 uh 85% of the company uh even after the IPO. And the only thing I can say about that is I hope that they take their darn time monetizing that position for sophisticated from Blackstoneone. Though I do expect them to exercise a certain degree of patience, especially since the stock is currently trading at only a slight premium what they originally paid for. How about the balance sheet which I'm so worried about when I have a company that's brought public by private equity. After accounting for the proceeds from the IPO, Jersey Mike has about $1.8 billion in long-term debt and about 276 million in cash and equivalents. So we're talking roughly 1.5 billion in net debt. Company racked up 200 million in EBIT dot during the first half of the year assuming they put up similar numbers in the second half. Jersey Mike would have a leverage ratio of 3.8 that is on the high side. But for a franchise business that generates a lot of cash asset light doesn't have a ton of cash expenses I'm actually not that troubled by it. Ideally the balance sheet should be cleaner but for this kind of company not really a problem. Finally, let's talk valuation, especially after the stock came down today. After pricing its IPO at $22 in the middle of its 21-2 range, Jersey Mike shares dropped down a couple bucks today at 21 for firming up at 2163. And boy, the company has an enterprise value that's the market cap plus the debt of $ 8.4 billion. And using my rough 2026 EBIT estimate of $400 million, that means it has projected enterprise multiple of 21, not PE, enterprise multiple. If you look at the other top restaurant chains that are franchiseoriented, Yum restaurant brands international Domino's Wingstop they all have enterprise multiples in the mid to high teens. So on that one, Jersey Mike might be trading at a premium. Can't have everything. The question is uh do we have enough to think that it deserves to trade at a premium? Honestly, I think it does for two big reasons. First is something I know personally because I studied the company for a long time is leadership. after Blackstone acquired the company last year. It brought in Charlie Morrison as CEO last spring. Now, longtime viewers might remember Morrison. I've been in many times here on Man Money. He served as the CEO of Wingstop during its heyday. Uh he was the CEO when Wingtop came public back in 2015. That was a phenomenal growth stock for a long time, climbing from more sevenfold sevenfold from the IPO of 15 to 123 by the time he resigned in March of 2022. I met with Charlie today when he was here at the stock exchange. Had to say hi. For all the money he made for viewers in his last gig. He's even more excited about the opportunity that has he's got with Jersey Mike's than he was with Wingstock. It is hard to disagree with him actually because the growth opportunity here is enormous. Morrison says the chain can grow from around 3,300 stores today to more than this one took my breath away 15,000 over time with about half of those locations domestic, half international. Outside the United States, Jersey Mike is in infancy, just a couple dozen in Canada. If you look at map of their current domestic storage, you can see lots of white space, especially in the western United States. Morrison also told me he thinks there's a lot of room to grow in cities as urban stores were deprioritized before he took over. In the near term, the company has a development pipeline of over 1,600 stores. Roughly 90% of that pipeline coming from existing franchise owners. That's very important because he knows their balance sheet. You won't be worried when you're in the franchising business. Unit growth is the name of the game. and Jersey Mike has it in spades. So, here's the bottom line on what I regard to be a very exciting story. Wall Street may not have been too uh let's say enamored by the Jersey uh Mike's IPO, but I think it's a great business and this tepid start represents a terrific buying opportunity for you at home. When you have a tremendous brand, powerful growth opportunity, proven leadership, I think that's a recipe for long-term price appreciation. Yeah, I like Jersey Mike. Let's go to Chuck in Arizona. Chuck. >> Hi. Hi, Jim. Uh, yeah, this is Chuck from Arizona. Uh, I was wondering with the recent cyber and ransomware attack and its latest earnings report, I'm wondering if I should hold on to or or buy more Coca-Cola. KO, >> no, you're absolutely fine in Coca-Cola. Actually, by the way, Coca-Cola was down really badly at one point today and came right back. Why? Because this is the best packaged food company there is. And I'm going to throw in a bonus prize. Crowd Strike. If you want to be able to worry about cyber security, that's the outfit I would buy still right here. All right, listen to me. Jersey Mike's may not have had the best debut today. It's kind of a bummer. I was so excited for everybody, but I think the sub story is worth buying here. And you're getting a better price than I thought I'd have to talk about what I wanted to do with this piece today. There's much more made money ahead, including my exclusive with the new and improved Blackberry. And speaking of turnarounds, I don't think the one at Starbucks is getting nearly enough credit. People were so lost in emotion about all the other stuff that's reporting. So, I'm going to check check into it, give you my take and all your calls rapid part tonight's edition of the lightning round. So, stay with Kramer. You're going to like this. I want to talk to you about one of the the greatest under the radar turnaround stories I've ever seen. It's Blackberry. Yes, BlackBerry. Back in the day, this was the original smartphone maker. Business is long gone. These days, BlackBerry makes software for cars, robotics, and industrial equipment. And they have a cyber security business that's amazing. After spending years bouncing along the bottom, this stock's up nearly 123% for 2026. BlackBerry reported a great quarter at the beginning of the month. Okay, now here's the real advantage. The stock's down over 33% for July. It's been dragged down with the rest of tech. Business is still in great shape, though. Let's check in with John G. Matteo, the CEO of Blackburn. Mr. G. Matteo, welcome to Mad Money. Thanks so much for having me on the program. >> Well, I find this is very exciting cuz when I first saw that your stock had moved and I had not been thinking about it, I said, "How is that possible? It's pulled back a little. What a great time for you to give us BlackBerry 101 and the Reshape Company." >> Fantastic. Hey, we just came through a massive transformation for the company focusing on two market segments for us. Our QNX which is our safety secure embedded software business power 275 million cars robotics medical instrumentation industrial automation I have to tell you that business is on fire we're seeing a tremendous amount of growth the others real steady Eddie and particularly with all the increased defense spending secure communications business our mobile device management our emergency notification and we have this incredible encryption technology for voice, data, and video that sells uh serves militaries all around the world. That's the new Blackberry and both of those businesses are very much on a growth trajectory. >> Okay. I want to start with the auto. I know those other use case, but that the number you gave it sounds like that you're actually on everybody's car >> just about 275 million cars. uh almost every car manufacturer from EV to combustion from Germany to Japan to uh Korea and everybody here in the US is as more software goes in the car all of these OEMs are standardizing their architecture on the QX operation. >> But at the same time, you have a bit of like an armhold model. There's no there's no great foundry up in Canada that you're using to put the stuff out. We do a we do a really good job of partnering with the entire ecosystem. Deep partnership with Qualcomm, Nvidia, Texas Instruments, ARM, Intel, all of the silicon that's going into the car completely standardized on Q&X. So we have a really good uh u partnership and ecosystem approach that's getting a lot of traction. >> So why do we need Q&X? Well, if something goes wrong is that where is its critical mission? Yeah, QX safety critical software for the vehicle. These are things when driver assist, blind spot assist, different technologies that are actually protecting, making sure that the car stops every single time when it's supposed to stop. Our software is that critical software that's making that happen. >> Okay. So, this is for say self-driving. It must be incredibly important, even more important than for a regular car. >> Absolutely. That's uh a lot of design wins, a lot of activity going on in the autonomous >> something like 22 out of 23. I mean, almost everybody uses you, right? There's one that's obvious outlier. >> There's one that's an outlier. >> Yeah, I think. Yeah. Okay. Now, uh robotics and you uh Q&X and robotics would seem like a natural uh it would be terrific for that. >> Absolutely. We just uh announced a partnership with Nvidia on the Halo safety stack which is powering robotics for all different use cases around the world. They've standardized on QX as the robotics uh operating system for everything they do with their entire stack. >> Do you think your legacy is being really the best the hardest to crack into has helped you or do you think it the notion that Blackberry didn't win so to speak hurt you? Where does it come out your history? Yeah, you know, we we're we're proud that we've had the resilience to uh reinvent ourselves. You know, we've tried a lot of different things over the years and over the last few years, we really honed in on these two these two market segments with Q&X and secure communications. It's helped us bring us back to growth. It's helped us with margin expansion. And you know what, Jim? It's helped us with cash generation. We're generating more cash now than we've made in the last 5 years. So, a lot of good momentum on those s uh those two parts of the business. >> Okay. Now, I'm going to read something from the com club that really intrigued me. Uh he these are some logos primarily across government, defense and regulated industries. North America. We secure deals with US Air Force, US Cyber Command, US Senate, US Secretary uh Secret Service and the White House. Are you one are you are who are you beating here? >> 75% of our business in the secure communications is with large governments around the world. US federal government one of the most significant ones Germany the German government has adopted our uh secure uh encrypted technology across their entire indust and naturally us being a Canadian company the Canadian government has adopted a lot of our secure communications to power um mission critical communications >> all right so look you do have a ton of money uh how do you balance buybacks investment in Q&X acquisitions I mean you're in great shape >> yeah balance sheet is I think we're in a really good We did some buybacks uh last year to help kind of move the stock to from where it was. You mentioned it was a little bit down in July, but we are up 100% u year to date and uh we've got a lot of great momentum going into the next year. So, from a a balance sheet perspective, we feel like we're in good shape. Okay, just to go back once more because I think people are going to be shocked about about that how much per vehicle you have a chance with alloy core to have even more content per vehicle or you want to are you going to be somebody like next year when I see you it's going to be even a bigger part of every vehicle. I look forward to coming back and announcing some nice alloy core wins. We've got some great momentum tremendous pipeline. It's us moving up the stack into the middleware and becoming instead of an operating system a platform player in the entire order. Well, I have to tell you and I know we got to go, but when it was at 12, I said, "Oh man, I can't do a big thing on it because I'm so afraid. I'll hurt people if I hope it comes down." It has come down. This is the level to buy. >> It's actually a pretty good >> and and there are a lot of people who love the brand. It's not the phone. It's better. John Gateo is the CEO of Blackberry. Still BB. Excellent. Man's back after the break. >> Coming up, you've got questions. Kramer's got the answers. Get charged up for a fast fire lightning round next. It is time. It's time for the light round by princip. And then the lightning round is over. ARE YOU READY? DAD. LET'S start with Riley in South Carolina. Riley. >> Yes, sir. Mr. Kramer, how you doing? >> Beta, I am having just a super bang up day. How about you? >> Yes, sir. It's Friday Eve. >> It is curious on your thoughts on Halmets. >> I've had it for my mother. It's my one of my absolute favorite aerospace plays. I'd buy it right here. Aerospace been down because the oil going up. That's ridiculous. Let's go to Steve in Ohio. Steve, >> yes. Uh, it's nice to uh hear your voice, Mr. Kramer Ohio. >> All right. All right. Let's go to work. >> Yeah. Farmers National Bank I'm interested in and hopefully we can uh find out which direction it's going. >> Well, I think the direction is up. It's a regional bank that is doing incredibly well. Uh you know, when they get this overbought on what I regard as a good, not unbelievable quarter, you got to wait until it cools down if you want to buy it. But if you do own it, please do not sell it. It's a good bank. Let's go to Mitch in Florida. Mitch. >> Hey, Mr. Kramer. I'm calling to get your opinion on a recent stock that just listed on the Dow as of July 1st. It's called Bending Spoons FBA. It's off. >> There's a really good digital. It's a really good software company. And I got to tell you, people just like in sour software companies, but I think a lot of us just because some of these headphones are pressing them down. I think Bennett SP is a good idea, but someone comes out and recommends a stock real soon. Let's go to Zack in Texas. Zack. >> Hey, Jim. I was wondering what you thought about uh a company that just had record Q2 results, best revenue and company history, best IBIDA and free cash flow. The apes seem to like the stock. What do you think about AMC theaters? >> You know, look, I it's it's just a spec. And if you want a spec, you got to have a couple good movies slay. You do okay. It's not my thing, frankly. But if you want a spec, I say AMC is fine. Now, we're going to go to Dolly in New York. Dolly, >> hey Jan, thank you for taking >> love your show. Um, wanted to ask you, what do you think of coherence at this point? >> I like coherent has come down so much. It's part of this mob of stocks that have come down the data center. I think it's the right level to buy. I'm going to bless it. Now, we're going to go to uh Quinton in in Georgia. Quinton, >> hey Jim. Uh, I started accumulating the stock in the upper 20s and recently uh trimmed about a quarter of the position. uh through their R&D. They are one of the hottest trends in plastic surgery, offering women breast augmentations with only local anesthesia and 1 hour recovery time. What do I do with the rest of uh establishment labs and do you see them as a takeover target? >> This is the kind of stock I'm going to give to Ben Sto to do a real drilled out. Ben is going to know this and we're going to come back cuz I do not know the stock myself. And that ladies and gentlemen, conclusion of the LIGHTNING ROUND. THE Lightning Round is sponsored by Charles Schwab. Coming up, Kramer's raising a glass to the CEO of Starbucks for restoring the coffee chain to Wall Street's good graces. Next We just don't talk enough about management on the show. That's because most of the time a CEO has to play with the hand they're dealt and that hand may be more or less set in stone. It's not like a new CEO can come in and change a company's culture overnight. I can count on one hand the new bosses who can come in and turn a broken franchise into winner. Now, one of those fingers on that hand would have to be reserved by Brian Nickel. Now, he is the CEO of Starbucks. In 2018, Brian went to work fixing the broken culture and strategy of Chipotle after the company had been hit by a series of foodborne illnesses and never really recovered. Using simple tactics, blocking and tackling, refreshed advertising, embracing Chipotle's reputation for natural fresh food, he gave you an astonishing 775% return from the day he took over until he got the Starbucks job 2 years ago. That is astonishing. At first, everyone got very excited that Brian came to Starbucks. The stock climbed from 76 to 95 in one day's time. This one sensing the term might not be as arduous as people thought. Stock then continued to climb to $117 by early last year. But reality set in a couple months later when the numbers didn't turn and the stock plummeted to $75 on a sobering quarter. At that point, two things happened. One, people began to sour on the franchise itself, realizing maybe Starbucks was a lot more broken than they thought. And two, they started thinking that maybe Nickel maybe be a miracle worker, but maybe this one's a coffee shop that can't be fixed. I think they weren't listening to what Nickel was actually saying when Starbucks didn't turn immediately. Yes, there were real problems. Slow ordering, prefuncter, often not nice place. An emphasis on getting in and getting out aesthetic way, not unlike Duncan, no coffee house fuel. But there was a template that he knew worked. the template of Starbucks or at least the Starbucks of old with the best customer service on time coffee, a great tasting brew, a nice place to sit and high but not necessarily endlessly raising prices. Hence his back to Starbucks Anthem for remaking Starbucks into not a place to get coffee, but a coffee house. By returning to its roots, including tremendous customer service, fantastic pickup, drive-thru, and take out throughput, one of his specialties, measured by a rigorous set of benchmarks per store, he could turn things around and get it done one by one by one. Sure, it takes longer that way. Plus, there were distractions. The endless price wars in China, fractious labor force, difficult climb. So, he sent the China business off to a lucrative joint venture. He used the incredibly good management tools and hierarchies that turn around Chipotle. He created some new rather simple drinks because complication slowed things down. Got rid of the pit stop Starbucks. Improved the loyalty plan. Brought back the electric outlet so you can sit and have a great cup of coffee and do some work. Now he's uplifting stores. He's done about a thousand which have already brought about superior results. There are thousands more. And he's already gotten Starbucks with 7.9% same store sales comp in our country with earnings forecasts that are boosted not cut. The thing most important that that he's done, I mean this is amazing. He took a company that people had written off and made it into a growth business that can finally break out of this dogone trading range. He's turned Starbucks into a terrific investment again. I think the stock goes much higher and it's a terrific place once again to sip a triple vente cappuccino with skim wet. Thanks Brian. I like to say there's always more summer. I promise just for you right here money. I'm J Kramer. See you next time. 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