Mad Money 10/05/26 | 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 Cra America. I make friends. I'm just trying to make a little bit of money. My job is not just entertain, but to teach you how this game works. So call me at 1800743 CBC. Tweet me Jim Kramer. Pattern recognition is the name of the game in this business. It allows you to make investing decisions that have some grounding in history. But what happens when the patterns go out of whack? Then what do you do? Well, you got a day like today when the Dow advanced 91 points. S&P gained 66% and the NASDAQ jumped 1.05% 05% to a record close all occurring with a backdrop that should not have generated such strong performance. Yes, today was bizarre because we're conditioned to believe that interest rates go down when oil goes down and stocks are supposed to be captive to the bond market, not the oil market. We've seen this pattern since the war broke out at the end of February. You could bank on it. I mean, literally bank on it. Banks were the chief losers when oil went up and interest rates soared along with it. But not today. Like so many other groups, the banking patterns went a ride, too, as oil went lower, but rates continued the relentless climb climb with the 30-year yield up a few basis points, putting the allimportant rate at 5.66% and that's way too close to comfort for six, right? I mean, it feels like the 30-year is headed to 6%. So, there goes the S&P traveling north all day. NASDAQ got a tremendous session. was led by Microsoft with better than expected numbers from co-pilot and Meta with the revaluation of this one-time pure advertising company something embraced by small business owners who can't get enough muse and there's Nvidia which is finally getting it stew from that last amazing quarter it hit another all-time high today so much for the people who said trade it don't own it in short the patterns broke today oil and interest rates moved in opposite directions this time it was oil that controlled the stock market by going lower. What the heck's going on here? Have the old decoupled? Usually, no. But we haven't had usual time since this president was elected. So, here's what we have to do. We have to pull things apart, figure the situ situation out so we can make our next moves. Let's start by tackling the price of oil. Now, this price has been reacting to the amount of oil that can get through the straight of we know the amount of oil coming through this crucial vein had declined from 18 million barrels a day to around a couple million barrels at its nadier. No hard and fast numbers here available for anything. Now though, it's about back to 80% of its pre-war levels. Now that is a gigantic comeback. We learned this weekend that the Saudis are discounting their oil by $5 below the standard Oman Dubai benchmark. Quizzical because oil's in such a short supply. What are they cutting price for? But you know what? I think they're just defending their market share and perhaps making China a happier customer than they might have been with Iran. But that's enough to shave a percent or two off the price of West Texas brink crude. There's no way oil can stay so high if the sorties are selling at a discount. But let's be clear about it. What's going Let's This is what's going on. The price of oil is going down because it keep producer lower prices to take market share. Not because the Iran war premium has gone away. For oil to trade on its fundamentals, which by the way would be a lot lower, the war would have to end. As usual, I'm not optimistic about the possibility of peace in the Middle East. The White House just sent a whole additional carrier group of about 7,000 sailors to the region along with an amphibious marine group of 2,000 soldiers. Doesn't exactly scream give peace a chance. Historically, you don't just send the Marines unless you tend to use them. But history hasn't meant all that much in this era. And as long as we're at war, I don't see oil getting too far away from what I call the pinned price of $100, which is somehow become the war price for quite a chunk of time now. All right. So then let's examine the bond market. That's also misleading, too. Sure, there are tons of Paramount Skyance bonds flying around. 52 billion of what I would call untenable paper, meaning those who really need yield are reaching mightily for it with this company. Some of these bonds are trading at 9%. Now, that doesn't mean bargain. It means red flag to me because you're assuming a lot of risk to chase that yield. I never chase yield, but there are always people who think it's worthwhile to do so. I cannot protect them from themselves. We also learned the Treasury Secretary Besson basically cpped to not being able to stop a bond market slide with his meager multi-billion dollar bond buys. He apparently bought something like $5 billion in change of bonds. He's plugging the dyke with a finger and it's got $31 trillion in treasuries behind it. I don't know what possessed him to say that he had better information than everyone else. That was kind of sad other than maybe that's something like the president might say. Uh what matters is that the bond sell off is only accelerated when Besson admitted defeat. The incredible thing about the bond market is that the last data point we have, the soft non-farm labor report from last Friday was supposed to be usually important. The weakness wake W A K should have lasted a week, maybe even two. Instead, it didn't even last a day. Now, that could be because we've got more inflationary statistics coming. I'm not so sure. It might be because we know that the US government has gigantic funding needs. Or maybe big hedge funds are shorting bonds. Yes, you can do that because the trend is your friend and the relentless decline in bond prices tells you that somebody's making fort to shorten them. So others are probably joining them. If even a soft employment number can't push bond prices up and yields down, then the short side is the path of least resistance, which leaves me with stocks. Now here I think there's tremendous distortion caused by some very big winners, namely Nvidia, Microsoft, and Meta. The rally in Nvidia has a lot to do with the fact that if you buy the latest and greatest chips, you make a lot of money doing so. That's something that Jensen Wong always told us would be the case. And that's why Elon Musk SpaceX, I think, is really going higher. Starting in December, it'll be making more than $3 billion a month, maybe as much as 4 billion. The numbers aren't all public simply for lending other companies its computing power. Now, there's a business for you. Elon runs an Nvidia house for SpaceX, meaning that his giant server farms run on Nvidia and they are worth a lot to any company in the AI game. Microsoft, now more on this one later, but it's all about the surge in co-pilot use. Meta, that's all about Muse and how it's beginning to have an impact with small business. A much less fickle customer than the current customer book of business, which is the consumer. These three are big enough to actually send the NASDAQ higher. But when you take them out of the equation, the classic safety stocks, so many of them in there, they got all hit today, which is supposed to happen given the action of the bond market, at least something was consistent. So we put it all together and we have a real oneoff day. Oil's down, but only because of a momentary excess of supply. Rates are up because demand for money is high and Treasury Secretary Beston turned out not to have any cards up his sleeve or otherwise. I sometimes I wonder if if he was a good bond trader back in the day. and stocks. As usual, a handful of hyperscalers are pushing up the NASDAQ and acolytes are along for the ride. Can a day be one offer meaning no pattern worth discerning? Oddly, in this market, I think you can be dismissed for a day as there are mitigating factors everywhere. That said, I wouldn't be too complacent. The bottom line, we have so many stocks with so many companies that can't rally until interest rates reach a level where selling bonds is just plain stupid. The only conclusion, the bond sellers so far have been anything but stupid. My money's on them to tell us when and where we're going next. Bonds, not oil are telling the truth, at least longer term. Always bank on the bond market longer term, even if we are in the throws of oil girrations at this very moment. Let's go to Joe in Illinois, please. Joe, >> hi Jim. Uh, this is Joe from Chicago where the Bears will be in the Super Bowl, the Socks in the World Series, and the the Wildcats will be in the top 25. But, you know, >> I'm not going to disagree. I always like I I I function on the uh concept of hope at least in the last uh six days. Tell me more. >> Okay. Anyway, Jim, I'm not a cowboy, but I've been riding the uh I've been riding this isn't my first rodeo. I've been riding the bulls with you for the last 25 years, and you've helped me tremendously, Jim. Thank you. >> You're a great teacher. Thank you. >> Thank you. But anyway, my my question is when do you invest in a stock and when do you trade a stock? For example, I know you've taught us to to keep stocks like Nvidia and Apple. Uh and then my question now is with Hona, with Honeywell Aerospace, it's been in a trading range. I've made some money over the last few days, but now it seems to be stuck at around 153. And I know you soured on the stock a little bit when it first came out, >> right? >> Um, so what do you think? Is it something that >> I the company has no credibility in my eyes? None whatsoever. Uh, you know, if it were a sports team and someone said that, we we all be nodding our head and say, "Yeah, no credibility here." You're never supposed to say that about a company. You're supposed to say, "Who was Kramer even say that? I've been a businessman all my life and business person and a successful one and I don't like anything I've seen from these guys. They have no credibility and I have the right to say it because I have credibility. Let's go to Sammy in California, please. Sammy. >> Hey. Hi Jim. And you do have credibility. And I want to tell you I think you're a trip and I staff and your office crew. >> Well, I got to call them as I see them. When I when I make something wrong, I am out there saying, you know what, I bought this and I made a mistake. I wish CEOs would do that. Then I wouldn't have to say they have no credibility. I would say at least they owned it. And that's all you can ask. I'm sorry, Sean, I didn't mean to interrupt, but sometimes it just makes me so angry to think that people can say whatever they want once they become CEOs. You can't. Not in this room. >> Oh, they do it. >> All right. >> Agree. And they run rapid ragged over half the country. So, anyway, I think I'm glad you speak up for the rest of us. >> Thank you, Sammy. You know, of course, they make a ton of money for no reason whatsoever. >> You have helped me make a ton of money. So, I want to tell you that. So, >> thank you. >> Um, I wanted to talk to you about stock. I bought it when it split. It's a semiconductor stock and it started at 125 this year. It rose to a fabulous 301 and of course I didn't sell it and during the momentum craze it dropped to 190. It's bouncing around 206. Um apparently its valuation is pretty high at 53 and it's according to what I read. I don't I'm not a brain brainiac with this. It stock revenue grew 14% below the 17% it would need for the price to improve. So, what catalyst will cause the stock KLA to rise and where do you see it going in the coming year? >> Okay. I think KLA look I like just you know I like Lamb. Okay. I mean I like Applied Materials and KA but they're all really good companies and they are the solution for the huge semiconductor shortage we have of which KA is certainly part of that uh of being able to make things better. I would own that stock right here. Again, I like I like LRCX more and I like AMAT more, but that's a very very good company and I would not sell it. Definitely not. Let's go to Fran and thanks for the kind comments. I sometimes I get a little heated because there's some companies where really some changes need to be made. Let's go to Francis in Florida, please. Francis, >> hello Jim. Good evening. Um, I have a two-part question for you about Domino's Pizza. Okay. >> I've owned it a long time. It's one of my largest positions. It's been very good to me through the years um both with dividends and with a steady uh share price increase. Okay. >> But the last three the last three four years uh it's wavered and um I'm wondering if you think uh it's in it's just kind of gotten off the superighway. It's in a rest area or do you think it still has a lot of uh road to go especially with international expansion and that it will get better with time? You know, this is a very tough one. And what I'm going to do, I usually don't like to punt like this, but they're about to report and they have a new CEO. And I just think when you have a new CEO and you're about to report, that's a fraught moment to be able to make a stand on a stock. Let's see how the new CEO handles himself. Let's see how the company does and then we'll be able to make a a better, more informed decision on DPZ, which was one of my biggest wins for a very long time. That was during the period when when Pat Doyle ran it. He he did a fantastic job. All right. When it comes to direction of stocks, my money is on the bond market to tell us what to do. And right now, the sellers are in charge there. On May money tonight, HPE, don't talk about enough, is finally breaking out. Is there even more room to run? Don't miss my deep dive on this one. Then gold prices change with the seasons. So, where are we in the cycle right now? I'm going off the charts to see if you should stay long on the precious metal, and Planet Labstock has been plummeting to earth lately. Could it be the start of a buying opportunity? Do not miss my tech take and 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. After years of suboptimal performance, HPE or ULackard Enterprise finally seem to be living up to its potential thanks to the AI infrastructure boom, this stock is up almost 185% year to date. Pretty serious outperformance. You know what? I think it's got more room than the rum. This is a company that primarily makes servers, data storage, and networking equipment along with hybrid cloud service. As the massive investments in data centers start to ramp a couple years ago, the promise of HPU was obvious. They were one of a small handful of companies like Dell, the super micro that make the kind of advanced servers that can handle the highestend AI processors like the ones made by Nvidia. These servers are how most enterprises actually get their hands on that technology, not right from the semiconductor company. Two years ago, I recommended HP precisely for that data center exposure because the company seemed like it was getting its house under, you know, pretty much under order under CEO Antonio Neri. HPE was in the low 20s back then and with the stock down in the high 60s, that was obviously a great time to buy. The truth is for most of 2024 and basically all 2025, this thing was indeed dead money. By last year, I know I was getting frustrated. Their acquisition of Juniper Networks took much longer than expected. The stock was stuck in the high teens. They reported some soft quarters and the tariff hurt them pretty badly. I like that Elliot Management was in there. Quite possibly the smartest activist in uh investment firm and they' taken a pretty big position in the spring of last year. But by June of last year, I told you, you know what? Enough. I'd rather just own Dell, which has proven itself the better operator of the two. Since then, Dell is up 390% and HP is up 283%. So, it was the right call, but I never needed to abandon HP, especially when Nvidia's Jensen Wong had dragged me over to meet Antonio at GCC nearly that's his big conference, Nvidia's big conference uh two years ago and then again earlier this year just to show me their exhibition booth. It was pretty pretty darn impressive. Look, I still prefer Dell, but HP has finally broken out of its funk and then some. How did this happen? How did the stock get its mojo back? I mean, for starters, my original thesis in HP was correct. Data centers desperately need advanced servers that can handle high-end GPUs from the likes of Nvidia and AMD. There are only really three players of scale here, and one of them, Super Micro, is in hot water because people associated with the company allegedly helped Chinese customers evade AI hardware export bans. Hm. That means HP is now the clear number two in the space behind Dell. And given the tremendous growth here, that's pretty good place to be. Second, this year the company's finally started putting up some truly great numbers. HP's core cloud and AI division, which houses the server business, has grown in a mid 20% clip for the past couple of quarters, thanks to over 30% revenue growth from server sales. Now doubledigit growth from storage products, too. Now, when the company was struggling in 2024 and 2025, they kept having trouble with their margins. While HP was seeing improved growth from AI, it was also spending heavily, which meant the new AI business was less profitable than it could have been. But over the past few quarters, that's really improved. HP's operating margin bottomed out at roughly 8% in second quarter of the fiscal 2025, meaning the quarter that ended in April 2025. It rose to the low double digits by last October and has climbed in each quarter of fiscal 2026. Their operating margin hit 12.7% in the first quarter, 3.3% in the second quarter, then jumped to 16.2% when they reported a month ago. Wall Street was only looking for 14%. Now, basically what's happened here is that their operating margin doubled in about a year and a half. That's the percentage of revenue left over after uh cost of goods sold and operating expenses. Listen, you double your operating margin, you're going to see a monster earnings boost. Sure enough, HP has raised its fullear earnings forecast every time it's reported this year. When Magic introduced their 2026 guidance last December, they were talking 2 and a quarter to 245 of earnings per share. When they reported a month ago, the forecast had risen to 375 to 385 per share. Not many companies have that kind of progression. HP also raised the sales outlook at each of the past two quarters and last month they rolled out a very strong outlook for the 2027 fiscal year. Management says to expect uh earnings uh of 440 to 460 per share. Wall Street was only looking for $48. That's a quite an impressive beat. Then there's the final piece of the puzzle, which is that HBE is finally getting credit for its networking business. This used to be a small piece of the pie, but then they decided to acquire Juniper Networks in early 2024. Juniper's a heavy hitter networking. Unfortunately, in January 2025, the Justice Department sued to block the deal. For a time, this seemed like the only merger they were that they were doing that they were against in the Trump administration, but they were really pursuing it pretty aggressively. Eventually though in June of last year they reached a pretty benign settlement and finally closed on Juniper last July. Ever since their networking division's been putting out fantastic numbers that was a good acquisition after all. Last week HP hosted a networking investor day event wholly dedicated to explaining the scale of the networking opportunity uh that's been created by the great data center buildout. Madress says they expect their networking division to see its revenue rise at a high teens compound annual growth rate through fiscal 2029 with operating margins in the mid to high 20s for the next 3 years. Many many stocks we companies would kill for that. In response, a bunch of different analysts started raising their price targets for HP to the point where I felt compelled to circle back to the story and tell you about it only to help you understand how a company got its group back and why this stock has been so strong. Now, for a long time, HP is one of those ideas that looked great in theory because we knew they venture maker killing from the great AI buildout, but it just didn't seem to work in reality. The company struggled with profitability and the Juniper Networks deal took way too long to close. But now everything's fallen into place and HP keeps putting up surprisingly strong numbers. So, let me give you the bottom line on this very exciting story. Still, I am not ready to say that I like HP more than Dell because Dell's best to breed, but Dell trades at 18 times extras or excessments. HP only trades at less than 15 times next year's numbers which is much lower than it should be versus its growth rate. So sure even if it's not as good as Dell and it's not the stocks act a lot cheaper given the lower valuation I think HP's got more upside here. Again not my absolute favorite but it is terrific to see co Anthony Antonio Ner's got his house in order and the company's putting up some excellent performance that I think can continue for some time is back after the break. Coming up, are we about to see a golden opportunity for a bounce back in gold? Kramer's digging into the charts to find out next. The last 8 months have been pretty darn brutal for the price of gold. After a spectacular run in 2024 and 2025, precious metal peaked at nearly $5,600 an ounce near the end of January. Since then, it's come down to around $4,100. Now, normally, you'd expect gold to be a winner during a period of persistent inflation. It sure did anticipate the inflationary flare up, but it had run up so dramatically coming into this year that perhaps it was just due for a serious pullback. But don't say you weren't warned. Back at the end of January, right around the peak, we checked in with our resident commodities expert Carly Garner. She's a brilliant technician who's senior commodity market strategist and broker to Carly trading as well as being the author of the Tarly perspective newsletter. She told us the precious metal markets were broken and gold seemed ready to peak or at least give us a sanity saving correction. In other words, she nailed the top. Since then, Garner's been bearish on gold, but now she thinks something's changed and she thinks there's a high probability of a relief rally. What makes her more sanguin? Okay, according to More Research Center, Inc., MRCI for short, which is a seasonal trading service, going long December gold futures around September 29 through October 25 has been a profitable trade in 12 of the last 15 years. Obviously, that's not a guarantee, but this has been a very strong seasonal pattern. Garner points out that autumn tends to be a good time to own gold thanks to the Indian festival and wedding season and China's golden week celebration. lots of demand from those. Just take a look at the seasonal pattern of the annual action in gold prices which mimics that of the last 15 years. You can see right here that has a strong tendency to rally from late September through late October. Of course, it also tends to be temporary. Then gold typically finds its footing again near the end of December before rallying hard in the first few months of next year. What makes this more compelling though is what's been holding the price of gold down. Normally when we have higher inflation, investors like to park their money in gold because it's a hard asset that retains its value even when your currency's purchasing power is diminishing by the day. But when oil prices sore and that pushes up treasury yields, that puts pressure on gold the same way it puts pressure on so many other things. So to get a real turn in this precious metal, we need oil to keep cooling off. And that's exactly what Garner is predicting. Take a look at the chart. This is the daily chart of West Texas Intermediate Crude. Lately, oil's pulled back from its highs in the triple digits, coming down to $89 a barrel today. Garner reminds us that oil's had a pretty dramatic sell off from May through July, back when President Trump and the Iranians seemed like they were willing to give peace a chance. That happened right after oil touched the upper trend line in this chart. When that happened again last month, we got yet another pullback from the highs. Garner's betting that we can see a similar decline this time. Doesn't hurt that our government and the rest of the G7 have opened the strategic petroleum reserves to flood the market with crude. As Garner sees it, once oil breaks down below $89, then the chart suggests to her that it could head back to the bottom of the channel. We're about $75 a barrel. Nice hit. I don't know if we'll get any foreign policy moves that can justify that kind of decline, but man, there's an election in a month. And it wouldn't surprise me if the White House does everything in its power to get oil lower before America votes. And if oil comes down, that's likely to send Treasury yields lower, too. Remember, higher oil has consistently pushed rates higher. It's not crazy to think that lower oil will provide us some rate relief. And when rates come down, well, that's good news for gold. Check out this very short-term chart with the price of the 10-year Treasury note in green versus the price of of gold in yellow. It's kind of a cool chart, isn't it? Every tick represents just two hours of trading. Garner points out that over the last 30 sessions, gold and the 10-year have settled in the same direction 94% of the same time. And you can see that from this chart, they're practically been trading lock step. So, anything that can push treasury prices higher, which sends yields lower, should also benefit gold prices. Finally, how about the daily chart of the October gold futures? This is not a popular futures contract. It's not very liquid. Most traders skip from the August futures to the December futures. But Garter points out that gold futures tend to spike in the direction of the dominant trend going into the first notice day. The day futures traders need to get long out of their long positions if they don't want to take physical delivery of the actual gold. In this case, that day happened to be September 30th. This time the October gold futures dropped $170. You can see here we go. uh in a single session going the first notice day, but then the price held above the floor of support. At the same time, it hit oversold levels in the RSI index, which you can see down here. Uh that's an important momentum indicator to go under that looks like a short-term bottom. As long as gold holds near 4,150, she expected to rebound to 4500, maybe to a high as 46 4650 or that's a lot. Uh in the not too distant future, 4500 represents a downturn resistance line. 4650 is where the 200 day moving average currently sits. Talking about a move up to here be certainly worth getting. Remember Garner is not a believer in the longer term. She she wouldn't expect gold to meaningfully exceed these levels, but that would still represent terrific rally. I'd like you to catch that. Here's the bottom line. The charts interpreted by Carly Garner suggest that we've got a high probability setup for a strong bounce in gold this month, making this a good time to go long. I think she makes a pretty darn compelling case. Let's take calls. Let's start in Don in Indiana. Don, >> hello. How are we doing today? >> I am doing well, Don. How are you doing? >> Uh, pretty good. I'd be happy to talk to Kramer. >> You got him. It's Jim. >> All right. Should I question? >> Well, I wanted to know, >> is SoFi a broken company or is it a broken stock? My daughter and I here in Indiana uh would would we're were thinking about moving some of our money to the SoFi bank and trying to invest a little more in the market from there. >> I think you're right. I look it's down 40% for the year. It is sitting almost at its low. It's got earnings. I mean, it's not like it's sitting there losing money. Anthony is doing a good job. It's been a terrible stock. Now, the fact it's been a terrible stock for a long time does not make it a terrible company. And I do think that I think it can bounce. It's just the problem is as we see with so many different cases when rates are going higher and you have a 26 PE on a stock. In other words, a price range multiple above market multiple it tends not to do well. And that's exactly what really is happening with SoFi. Let's go with uh Fred in Louisiana. Fred, >> hey Jim, I'm from uh Chicago, Illinois. I got a question about RTX Corp. >> Mid August it alltime high is 226. It's lost almost 20%. Why? >> Okay, so people feel that for some reason of which I disagree, that the defense budget is peaked and we're not going to put any more money into defense that enough has been spent. Meanwhile, RTX keeps getting contract after contract after contract. However, it also has aerospace, commercial aerospace, and anything touching commercial aerospace has been weak because people feel with oil this high, it's only a matter of time before the airlines cut their purchase, their purchasing of planes. It has not happened. Uh, but my travel trust has done very poorly in Boeing. Uh, I always like to play with it open hand. It's done poorly and it it just bothers me tremendously. But RTX is pretty much in the same situation. All right, let's go to Austin in Minnesota. Austin, >> hey Jim, I love your show. Thanks for taking my call. >> Thank you, man. I appreciate that. Thank you. >> So, I hear you say all the time, buy broken stocks, not broken companies. And I certainly don't think this company is broken considering its price decline year to date. Would you classify ISRG, Intuitive Surgical, as a broken stock we should consider buying? >> Um, I don't like that particular uh business anymore because there's too many companies that want to be in it, particularly Johnson and Johnson. Anything can bounce, but it's at 37 times earnings and I do not think it it it warrants that high a price earnings multiple given the fact that the uh Colossus with the AAA balance sheet J&J is coming in against it. I like the company very much. It's just too expensive a stock. All right. The charts intervened by Carly Garner suggest that at this point in the calendar, gold prices are poised to go up. It It's a good time to go long. Hey, much more made money. Can Planet Labs wa boy has that gotten killed. Can it launch its stock back into orbit? I'm digging deeper on the satellite company. Then, when it comes to the AI trade, it looks like Microsoft is finally getting its due. Don't miss my analysis of this company and why I've been pounding the table on it for a while with the charitable tr charitable trust at the CBC Investing Club and of course all your calls rapid fire tonight's edition of the lightning round. So stay with CR. All right. What the heck just happened to the stock of retail favorite Planet Labs? Now, this is a promising company with hundreds of Earth imaging satellites in orbit. 13 months ago, we had CEO Will Marshall on the show. I thought he told a great story. The stock soared, flying from about $10 last fall to more than $51 at its highs in May, fueled by major government contracts, and retail investors seemingly insatable for anything tied to space. But then the stock fell apart. Planet Labs plunged 26% on June 5th after launching a $ 1.5 billion stock sale program the day after reported a fantastic quarter. It dropped another 9% the day SpaceX came public and then lost 9.6% more over the following two sessions. At that point it had fallen to the high 20s. Now, from late August into September, it fell 14 out of 16 days, sliding to 16 bucks. Even after Friday's 8% rally following launch of Google's AI chips aboard a Planet Lab satellite, it closed at $17.50. Today, it's trading at $17 and change, about 2/3 below its peak. Now, that is quite a collapse, right? So, what went wrong here? Now, some of this is simply because many investors swapped out of smaller space plays into the much bigger SpaceX after it came public. I do not blame them. Do you know that even after today's 7.6% increase, I think SpaceX remains a fantastic stock for long-term shareholders, but it strength only explains part of the decline in Planet Labs. Remember, this started when they authorized that plan to sell $1.5 billion worth of stock, about 10% of the market cap at the time. Planet didn't issue the entire amount immediately, but the prospect, the delilution from those new shares helped overwhelm a better than expected quarter. I understand why investors got spooked by this, but we're talking about literal rocket science here. It ain't cheap. The stock was trading at more than 40 times this year's sales when it peaked in May. So, you could argue it was priced for perfection. 40 times earnings is a lot of money. Sales is big. Now, it's down to 14 times sales now. Well, it's still not cheap. Let me tell you why I think it might be worth the price. Planet Labs operates imaging satellites providing data analytics and software to help governments and industries track global changes. They can sell the same images to dozens of different customers. The potential users, well, the uses are enormous. Farmers can monitor crops. Insurers can assess disaster damage. Governments uh can track ports and military facilities. Energy companies can monitor infrastructure and emissions. And all this is much easier with the help of AI. Plus, planets data archive enormous advantage. A competitor can launch a satellite tomorrow, but it can't go back and photograph what happened five years ago, can it? Governments increasingly want dedicated satellite capabilities, too. Planet can build and operate systems without their customers having to develop an entire space program themselves. Countries want greater control over their intelligence capabilities, and they don't necessarily have years to wait, which is why the company keeps winning big contracts with governments around the world. And look, the numbers are pretty good. When Planet Labs reported a month ago, they delivered a healthy top and bottom line beat. 58% revenue growth. Wow. Defense and intelligence revenue grew more than 90%. Commercial revenue was up more than 15%. Civil government gained more than 5%. I wish that had been bigger, but they made 2 cents a share when the street was looking for a loss of 2 cents. Not eyepopping profits, but it's important to note they did indeed make a profit. Clearly, defense is doing the heavy lifting here. Revenue from Europe, the Middle East, and Africa increased more than 130% because countries in the in the region can't afford to stand on intelligence. I think commercial opportunities for plant labs are enormous, too. But so far, the uptake has been much slower than I thought. Unfortunately, despite the strong results, Planet's guidance for the current quarter came in light. Some Swedish satellite program revenue arrived early, boosting the second quarter at the third quarter's expense. People didn't like that. Longer term for the fiscal year ending in January 2027, Planet raised the lower end of its revenue forecast. The new range implies 40 to 43% growth. It raised adjusted gross margin guidance from 53% at the midpoint to 56% at the midpoint. I regarded that as significant. Still, you can see why the response was indeed mixed. Planet's demand is exciting, but investors want more large contracts and evidence that their cash generation can improve consistently. They finished the quarter with an $850 million backlog. That's down versus the previous quarter because they didn't get enough new contracts to offset the work they finished. Not good. Manager expects the existing backlog to generate more than $400 million in business over the next four quarters. That's for any new business or contract renewals. Wall Street's looking for the backlog to rise above $1 billion in current quarter. Now, that would be encouraging. Planet's also got a bunch of new satellites that can collect a broader spectrum of data or provide more detail or faster data delivery. And there's some good a good Google angle that people should be talking about. Alpha is a stake in Planet Labs. Significant shareholders, some quality sponsorship. Four days ago, a planet prototype satellite carrying four of Google's custom AI chips reached orbit aboard SpaceX's Transporter 18 mission. The company's established contract contact and the news helped send the stock flying Friday. This is all about part of a project to see if AI computing infrastructure can operate in space using solar energy. We know how important that's going to be. Solar is much more efficient in orbit because there's no atmosphere or ozone layer getting in the way. Google choosing to uh choosing Planet for this key test tells you something about the team and its technology. Now, for the spending, one of the main things that's been scaring people away from the stock, Planet Labs raised its annual capital expenditure forecast to 100 to 115 million. That's up from 80 million to $95 million range. It's buying components, developing satellites, and expanding manufacturing in Germany. Those in investments support growth, but the bills arrive before the returns do. You get that? In the meantime, Planet has $865 million of cash in short-term investments to fund the work. Roughly $120 million came from stock sales during the quarter. It also generated nearly 24 million of free cash flow in the latest quarter. Okay, rookie numbers, but I don't think you'll have to worry about another fundraising in the near future. Put it all together and you know what? I like this one. There are only a handful of companies in the space business that I'm willing to get behind. SpaceX is my blessing as long as you're in it for the long haul and long haul only. Planet Labs makes for a nice speculative pick. Here's the bottom line. If you like Planet Labs as much as I do, I put on a small position here. Leave room to buy more if the stock keeps getting hammered. Remember, this was a penny stock not that long ago. It can certainly fall further in at this valuation, but the business is looking good at this point, and I think believers will only be rewarded. Just don't buy it all at once. Bad money's back after the break. Coming up, he's the fastest mind on Wall Street, so we're putting him to the test with your help. Bring on the lightning round. Next, it is time to light the stock by sell my staff to learn how you plan this. And then the lightning round is over. Are you ready, Steve? Daddy, tell the lawyer Jerry cup for you, Jerry. >> Jim Big Southern Cali booya to you. >> Excellent. Right back at you. What's going on, >> Jim? You're the journey and the destination to investing. I appreciate the call. >> Um, yeah, big big uh big question for you. So, small and midsize businesses I think my instincts are telling me are going to make a run end of the year, probably into 2027. this iconic brand should be the benefactor of it. Um, you're a sleeper on the street. What do you think of Avery Denison? >> I've always liked it. It sells. It's always sells a reasonable multiple. 16 17 pounds. He's always has very traditional growth. I think you've got a winner there. I totally concur with your analysis. Remember, whether it be small or large, if the numbers are good, I'm with it. Let's go to Chris in New Hampshire. Chris, >> hey Jim, wanted to know your thought about Sienna. I think Santa's very good. I happen to like optical. You know, the one that I had liked for the club was corny. I'm waiting for it to come down to be able to get back in. It never seems to come in. Let's go to Baron in Texas. Baron, >> hello. What up, Jim? Or at long? Um, this company has a 4 PE of 16 with a PEG ratio under one. They operate pawn shops between the US, Latin America, and the UK. What are your thoughts on First Cast Holdings? You know, I have I've looked at the times and one time I did recommend a long long time ago, but because it's a pawn shop company, I don't understand that business model well enough to be able to opine on it and I think therefor's too tricky for me. Let's go to Ron in Arkansas. Ron, >> hey Jim, thank you for taking my call. I've been a member for only two years but been retired for 19 and have your book. >> All right. Thank you very much. Thank you for reading. Thank you for joining. How can I help you? Ron. >> Okay. In addition to owning investment club recommendations for banks, I also built a position in a European bank starting below $16 and had snitled on the way up. Jim, has my double banger stock run out of gas? The stock is ING. No, no, ING is good. I I think ING is fine. People are very worried about Europe right now because of France. I think ING is good. I'm going to make it a twofer. I know there's a snap election in Spain, but I happen to like uh Veno Santandere very much, too. I think you're in good shape. Let's go to Patrick in Texas. Patrick. >> Hi Patrick. Uh Jim, this is Patrick calling from the Alamo City. Uh there has been recent information presented at two international muscle disease meetings showing that the increased distro microdistrofen levels seen with Seropa's elevas correlate with improved and prolonged functional capacity in patients with muscular distrophe. How does this affect your investment thesis for the company? >> This is a very controversial stock. I know that uh I want everything to work for people who uh who have this and the families who have it, but I cannot opine on it cuz it's just too difficult for me to understand. I've just got to own that. And that, ladies and gentlemen, conclusion of the lightning round. >> The lightning round is sponsored by Charles Schwab. This week it's Microsoft's turn. Last week I explained how much Meta's Muse platform might be worth to the enterprise which allowed Meta stock to soar because Wall Street loves the enterprise business. Much more reliable than consumer business which is considered fickle and unreliable. Then last week we saw some eyeopening data from 100X that terrific data outlet that uses predictive surveys to spot things before they happen. CEO Rob Pace pointed out that AI remains a powerful in industry with anthropics cla having a 33.2% net future usage in uh intent score. That is incredible and gigantic lead. In second though it was actually Microsoft's co-pilot 15.3% net future usage intent followed by Gemini 11.7% and chat GBT at 10.9%. Now these are all still very close closely cluster but I was shocked to see Microsoft leapfrogging Google and open AI. It would have been unbelievable for that latest quarter when we learned the copilot has more than 30 million paid customers. I went back to Pace to ask about the disparity and he shared with me a chart that shows a sizable lead over the competitor set that includes Claude and Chat GBT on the issue of trust. The positive versus negative differentiation as you can see cannot be ignored or denied. Now most of you know me as a journalist but before my current incarnation I was a pretty good business person served on boards that make big decisions on big matters or at least we thought they were big. I mean everyone would make a mistake. I know that Claude and Chat GBT are the best at what they do. But lately, the companies behind them, Anthropic and Open AI, have engaged in what I regard as erratic behavior. OpenAI has a CEO Sam Waldman, who refused to join the Open Secure AI Alliance, a group that's created by Nvidia's Jensen Jensen Wong. It was surprising given how many big companies endorsed his plan for safety. Dario Amade of Anthropic has been the most forthright and frankly the scariest about the possibility of AI representing an existential threat to humanity. He made me feel like I was reading The Stand where a vast man-made plague killed almost everyone. Frightening book by Stephen King. Frightening thesis by Dario. But then the guy meets with the president of the United States along with the other technology leaders or big shots or oligarchs. And he didn't seem to mention any of his reservations when he spoke at the president's impromptu press conference. He seemed to agree with the president. One minute he's warning of human extinction, the next he seems to be on board with the president's safe at any speed ethos. I I don't think that's great for anthropics credibility. Which brings me back to Microsoft. If you're to be making a presentation or board meeting right now after what's happened about which AI platform you should use, you would say, "I don't know. Let's just turn it over to Microsoft." It makes sense. Microsoft's already a trusted partner of the enterprise with nothing erratic about its leaders. After toiling in the bearish vineyards for some time, Microsoft stock is finally breaking out. Aid in part by I think our segment Friday, but also because a very powerful analyst Ben Wright just changed his view on the stock. He works at Melius. Uh he did a terrific piece called the adults are in charge. Echoing my Friday theme. Uh Ben, who really didn't care for the stock not that long ago, put some real meat on the Microsoft bones talking about how Azure's cloud computing division might grow as fast as 50%. That'd be a considerable acceleration. That's giving the stock a gigantic push. In the end, Microsoft has good governance. That to me sounds a lot safer than the two anointed winners, Anthropic and Open AI. I think that means we're witnessing the reinstitutionalizing of AI with the incumbent Microsoft having a lot of pull at the board level. Boards don't like surprises. They don't like erratic behavior. They don't want to be embarrassed or they don't want to be second guessed. Consider it a good reason to stay in the stock of Microsoft and an even better reason even at this price to buy it. I like to say there's always more market summary. I promise just for you right here made money. I'm J Kramer. See you tomorrow. All opinions expressed by Jim Kramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by Kramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. 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