Mad Money w/ Jim Cramer 9/28/26

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1:17Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. Other people want to make friends? I'm just trying to save you some money. My job is not just to entertain you, but to teach. So call me at 1-800-743-CBC or tweet me at Jim Cramer. Wall Street hates nothing more than uncertainty. If the president would simply explain his plan for Iran, even if that plan includes enduring higher prices for pretty much everything until we somehow win, I think business would be in much better shape than it is. Instead, we have this drip torture where prices seem to go up a little each week impacting everything we buy at a Kroger or a Lowe's or McDonald's, and we have no idea how long we have to cope.

2:01Instead, we have this lack of strategy, so everyone from the heads of households to CEOs of major companies all cringe that prices have to be raised yet again. And that's how you get days like today, where the Dow gets 347 points, S &P loses 0.77%, and the Nasdaq dropped 0.92%. I know it's not the kind of thing you do before an election, But if the president would just tell us to prepare for pain, it would provide clarity, although it would also make the Fed's chief Fed chief's job a lot clearer. Kevin Warsh could say, look, we have to tighten until the war ends because we are becoming a guns and oil economy, like a less palatable version of the guns and butter economy we had under President Johnson during the Vietnam War.

2:44That set up led to rampant inflation. Eventually, our government gave up on both the Vietnam War and the war on poverty. So inflation slowly subsided for years until the end of the 70s when it came roaring back. Of course, we don't want any of that, nor do we want to wear whip inflation now buttons like I did under President Gerald Ford after Nixon resigned. 12 percent inflation back then. A button didn't solve it. Only much higher Fed mandated interest did. That was painful for me as someone who's a stock picker. the lack of an endgame with no source of energy and tremendous new sources, at least, and tremendous costs being pushed through the system.

3:19It makes it more difficult to find stocks that are worth owning. That's true. Members of the CBC Investment Club know I've been resolute, though, that there are opportunities like the two stocks that I've been recommending now for the last month, Intel and Meta. I know it's boring when I repeat the same stocks relentlessly, but without the repetition, it just doesn't get through. And these have been winners. Why Intel? Why Meta? They fit the moment, that's why. First, the products are in such high demand, one new, one old, that there are no concerns about demand destruction, which is usually the end result when higher interest rates clash with higher prices.

3:54Second, they're each in a new product cycle. Meta has Muse, its personal agentic AI platform that could potentially have several billion users. Personal assistance, whether for consumers or for the enterprise, are irresistible when they're cheap. Muse is free as long as you don't use it too much. I think Meta crushed it with this, and I bet it'll have much more market share than OpenAI, which remains niche compared to the house that Zuckerberg built. By the way, we're going to find out all about the impact of this huge new product tomorrow when we sit down with Meta's president, Dina Powell-McCormick.

4:31You do not want to miss that. Muse, like so many other agentic devices, is a workhorse that runs on CPUs. There are only three major CPU companies, Intel, AMD and Arm Holdings. This market is so big that it can use them all. Plus, Intel has a new foundry coming online with great specs, albeit not as great as Taiwan Semi. Intel CEO Lip Boutin has turned his company from a has-been into a force to be reckoned with. Of course, Lisa Su's AMD has left them in the dust, more on that later. But Lip Boutin can see in the dust. And unlike his still-dreaming predecessor, Pat Gelsinger, He has a grip on what can be done and, more important, what can't.

5:09Earlier this month, Reuters reported that Intel might be scaling back its Ohio memory chip factory, perhaps sharing it with SK Highness, Korean giant, to staunch the bleeding. He's a disciplined investor. It comes from his time as a disciplined venture capitalist. I have total faith that his plan to return Intel to greatness will succeed. However, I acknowledge that balance sheet was wrecked by Gelsinger and the current turnaround only possible thanks to the resurgence of CPU demand. Intel stock dropped seven points today, something we are used to seeing after paramonic moves. It could end up being another good chance to get in.

5:42Let's go back, though, to the idea of what can work in an environment when oil's up, interest rates are up, and therefore stocks tend to go down like they did today. You have to see what companies have. They need demand, they need pricing power, and they need scale. If they have all three, they won't be as impacted by higher interest rates courtesy of the war with the RAND. Now, that doesn't I know. I know it leaves us with a breath problem and not the kind that can be cured by Listerine. The oil complex represents the only stocks that are truly in demand. Chevron is the king with great offshore, terrific Venezuela, amazing Asia and Mediterranean and extraordinary permanent assets.

6:19Best balance sheet, too. OK, so you got that. You want yield. It's Enbridge with a six percent yield. They bring in oil from Canada. President would be unwise to ban Canadian oil, although his disdain for Canada seems to know no bounce. So who knows? Wouldn't be the first time he cuts his nose off despite his face. That concern helps explain why Inbridge has such a big yield. And I like the NatGas liquid business, which is just crushing America because all the problems in the Gulf. It's Enterprise Product Partners, EPD, which I read about positively and how to make money in any market if you want to have them.

6:49Now, here's the real irony. I know I should be worried about the breadth of the market. So few stocks are indeed working the fewest in terms of breadth that we've had since, yes, the blow up of the dotcom period. And that says we're in real trouble. But there were so many times in the last two decades that we've been in real trouble that I can't even count them. In these moments, you try to find the stocks that work in the turbulent negative environment we find ourselves in. You don't abdicate. You don't say, you know what, we're in an impossible situation. You double down on the winners like we said to do a meta in Intel.

7:21The ideas are out there. Have you noticed Microsoft, for instance? There's a company that's quietly becoming a force via Copilot. Don't forget Apple. As someone who's buying a second line for the duo, a must with Starlink everywhere, I know I won't be alone. And, of course, remember the other own don't trade stock, NVIDIA. Today it announced a sound plan based on engineering that could control the run amok autonomous agents we keep hearing about. One's unleashed by Anthropica and OpenAI. Many other big tech companies, including Anthropic, have joined NVIDIA's effort. Plus, NVIDIA announced a monster$150 billion buyback today.

8:00That's the biggest ever. Watchers of this show and members of the CBC Investing Club know I've been calling for that. Let's hope it's actively managed to take advantage of momentary dips. Here's the bottom line. In every period like this, when it's dark and dawn is not nigh, you have a choice. You can make hay while the moon shines, or you can wait for the sun. Personally, I don't like to wait. I just want to try to make some money. Let's go to Sam in Pennsylvania. Sam. Jim, how are you? I am good, Sam. How about you? I'm good. You know, Jim, in a world of all this AI slop, I think a company like Thomson Reuters should be becoming more valuable, given the fact that it's got a good moat around the reliability of the information that they're selling.

8:43So I'm curious what you think about Thomson Reuters, given the sell-off that it's experienced as part of this software apocalypse. But I think this company is undervalued given the moat around that information. It's regulated industries rely on it, and that's not something that can be replaced by AI. I think that's true, but what has happened is everything that is possibly considered to be replaced by AI has to have its multiple shrink. And this stock still sells at 28 times earnings. Until that multiple comes down and that yield goes up, of course, is what happens when a stock declines, it's not a bargain.

9:18And that's what he said. It's just not a bargain. Let's go to Dustin in Oklahoma. Dustin. Oh, yeah, Jimbo. How you doing, sir? I am good, Dustin. How about you? Thank you. What's going on? I'm doing great. Blessed. Hey, I'm calling you back, my friend, on a company we've discussed before. In the last two plus months, it's gone from, you know, 52-week high to a 52-week low. You know, they're in the process of growing a lot at 185 new stores this year and possibly a real estate deal that may be falling through with salad and go. What are your thoughts right now on Dutch Bros? Because I'm a believer every time I'm there, it's busy.

9:53I'm ready to roll with it. You know, I tell you, I think this stock's being, I think it's being rated. I'm not kidding. I know the price target's been cut by a couple of days, but I think it's actually being pushed down. I'm not saying being manipulated. You're allowed to do whatever the heck you want. But this company has terrific growth, and it's been just crushed. And I don't think it merits the crushing, but there are people who say you got to short it and go long something else. And that I think is a major reason why the stock is going down. It's a very well-run company. Let's go to Robert in New York.

10:22Robert. Jim, thank you so much for having me tonight. I appreciate it very much. Thank you, Robert. Good to hear from you. Thank you, Jim. Jim, I was up in Buffalo last week. And it's one question I get from a lot of the young people. And they say, well, how do I make money in the market? And there's two ways to make money in the market. I say you've got to watch Kramer and you've got to go out and buy the book, how to make money in any market. And I tell these young people the time, Jim, everywhere I go, buy the book. That's why you thank you. I mean, I'm trying to get people to understand why a stock it's why a stock goes up or down.

10:58I mean, no one tells you it because it's it took me 200 pages just to describe why a stock goes up a dollar. But it was worth it. And that's why the young people should buy this book. across America. Thank you. I appreciate it. Jim, if you started at 23, 24 years old, by the time they get to our age, they make millions of dollars if they start now. Well, that's what we want. We hope they do that. How can I help you tonight? You got to get to work. Okay. So this next company operates a chain of fast-tasual restaurants serving burritos, taco bowls, et cetera. They emphasize food with integrity, sourcing high quality ingredients, including naturally raised meats, organic produce.

11:36They have a growing digital platforms to support online delivery, mobile transactions. They're experiencing strong, comparavel restaurant sales growth. Now, Jim, they just appointed Sabir Sami to its board of directors. Sami previously held senior leadership roles at Yum Brands, including positions across major global quick service restaurant chains. He's an expert. And the guy who's running the company, Scott Boatwright, is keeping the boat straight and right. The name of it is Chipotle. I think Chipotle at 31, it seems to hold that level. I can't say it's cheap, but it's never been cheap. It has been at this price and bounced before, and I think it will do so again.

12:17I like the stock down here, even as the restaurant group has gone completely out of favor. You can make hay while the moon shines. I prefer to do that than just sit on my hands and look at the screen. I'm having money tonight. AMD briefly entered the Trillionaire Club. So what or who is behind this meteoric rise? I'm going to take a closer look. That is, the Fed raises rates, are a high-yielding stock still an area of opportunity? I'm going to investigate. And I'm digging deeper into Costco's latest quarter. Don't miss my take on this club name. And stay with Kramer. Don't miss a second of Mad Money.

12:54Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com. or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com. Get ready for Thanksgiving with great deals and crowd-pleasing flavors from Whole Foods Market. Stock your pantry with 365 brand holiday must-haves like turkey gravy, organic green beans, crispy onions, organic stuffing, instant mashed potatoes, and more. Plus, find deals on frozen turkey, appetizers, and produce to check everything off your list early. Save on chef-inspired holiday favorites now at Whole Foods Market.

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14:49Last week, AMD rallied nearly 13%, temporarily reaching a trillion-dollar market cap, although it dipped out of the trillionaires' club today. Still, thanks to the launch of Meta's personal AI agent platform, anything connected to the CPU business caught fire because agentic AI requires lots of high-end central processing units, CPUs, and AMD's arguably become the top dog in CPUs. Honestly, it's incredible how far this company's come under the leadership of Dr. Lisa Su. She took over as CEO of AMD roughly 12 years ago, and at the time, this company was an afterthought, an asterisk, Justin Total also ran a semiconductor company, one that spent nearly its entire existence living in the shadow of Intel.

15:34For decades, I got the sense that Intel was going easy on them. Why? Because they let AMD go under. Well, they might get hit with an antitrust investigation by the Justice Department. I think it was the right call for Intel, but AMD was just in a pitiful state for ages. When Lisa Su came in near the end of 2014, this was a$3 and change stock with a pathetic market capitalization of just over$2.5 billion. Practically a small cap. And Wall Street didn't like the news of her appointment. The next day, the stock dropped 10 percent. Probably just below$3. In retrospect, I bet those sellers are kicking themselves.

16:09They should be wearing, like, kick-me signs on their butts. Since Lisa's suit came in, AMD's rallied an astonishing 18.433 percent. That's right. I'm going to repeat this. 18 ,433 percent. It now is a$992 billion market cap down from the trillion dollar club after today's beatdown for most of the AI and AI related stocks, including Intel, by the way. But back in 2014, this future was unimaginable. AMD was in dire straits. When Lisa Su took over, their core CPU business was losing market share in servers and PCs. Now, they bought this thing, ATI Technologies, in 2006, get into the graphics card game.

16:49That deal left them, let's saddle with a mountain of debt. A lot of people thought that there was a risk of this company going bankrupt. Then Dr. Su comes in and turns around pretty much everything. You know, it was a cold shot. When the stock was at$5, she met me for dinner. She told me she was going to crush Intel, that she'd overtake them, and I better get off the Intel train and jump on the AMD train. At first I argued, then I shut up, because I could tell she was serious, and seriously on her game. She schooled me. So I got on the AMD train and avoided the oncoming Intel train wreck. Look, an engineer by trade with bachelor's, master's and doctorate degrees in electrical engineering from MIT, which, of course, means she's smarter than all of us.

17:33Sue set out to beat Intel and then NVIDIA at their own game by designing high performance ships for the end markets that AMD could truly compete in. That meant getting out of markets where AMD was not competitive enough. Things like chips for smartphones and sensors for so-called Internet of Things systems. They gave up on that stuff. They had not enough money in it. Since then, we've seen AMD move surgically from market to market using Italian tiles as their product lines, which is fine with me having just returned from Italy. First, they improved in core areas like CPUs for servers and PCs, quickly catching up to and then surpassing Intel.

18:07Technically, AMD's market capitalization caught up to Intel back in mid-2022. But the truth is, they've been running circles around Intel for years at that point. Now, AMD is within spitting distance of that trillion-dollar club, but I mentioned Intel is a$613 billion company, and that's after Intel engineered its own remarkable turnaround. Remember, last year, Intel had to be built out by the feds in the form of a$9 billion equity investment. At the same time, AMD became very competitive in graphic cars and systems-on-the-chip solutions for video games. Now, more recently, AMD decided to do something really ambitious, which is to challenge NVIDIA in the high-end GPU business that NVIDIA dominates.

18:41That's AI training and inference workloads. Of course, look, NVIDIA is still the top dog. No one would dispute that. But AMD is making big money, too, and it's some really solid products that are more than competitive than people think. Early on, Lisa Su realized that AI was the future. There would be enough room for multiple players in the high-end GPU space. NVIDIA literally can't make their own chips fast enough to satisfy the demand. Of course, there was room for AMD there, and just a great business decision. Now, look, I don't want to make all this sound easy. Lisa Su took over at AMD and basically never stopped working.

19:11The whole time she kept her head down, the only time she ever allowed herself a deserving break was her commencement address at MIT this year. A terrific victory lap. By the way, she also made one of the best pitches for AI that I've heard in a while. I'm going to quote it. It is not just a tool that can help us do things faster. It is deeper than that. It has the potential to accelerate discovery in every field and help us solve problems we have never been able to solve before. End quote. Now, that's a much easier sell than it'll take all your jobs and possibly destroy the world. Lisa has a beat on common sense.

19:43She deserves our trust. She certainly earned it. I am proud to know her. But getting to this point took a tremendous amount of hard work. For a chip maker, product development cycles take they take multiple years. And it's not enough to have just strong one off products from time to time. You need to present a clear product roadmap that gives tech customers the confidence to design your chips into future iterations of their products. And he did exactly that, gradually winning the confidence of both customers and Wall Street. Dr. Su made a huge bet on high-performance computing not long after she took over, and, well, for the last several years, it's just been money.

20:18Now, the latest leg higher, the one that brought AMD to the Trillionaire Dollar Club, has been, in part, a stroke of good luck. Like I mentioned before, earlier this year, the focus for investors shifted from AI model training to inference and agentics, and it's become clear that demand for CPUs was going to explode because you need more CPUs to run these useful AI agents. Even though I feel much better about Intel these days under new CEO Lip Bhutan, who took over last year, AMD remains the leader of CPUs, which is why people have been buying the stock hand over fist. This one had a big but surprisingly quiet run this past spring, climbing for about$200 the end of March, roughly$500 by late May, and$580 by the end of June as the agentex story really started playing out, at least in the enterprise.

21:05After taking a breather and pulling back a bit in July and August, AMD caught fire again this month when Meta launched Muse, its consumer agentic AI platform. The stock's now up almost 30 percent for the month of September alone. Of course, today we had another increase in oil prices, so interest rates ticked up and stocks pulled back, especially stocks with big gains. AMD sold off 3.6 percent today, falling back below that trillion dollar measure. But man, what an incredible run. Thanks to Lisa Su's understated, dogged, tenacious leadership, she transformed a$2.5 billion company into a nearly trillion dollar powerhouse.

21:41I let the hobgoblin of diversification keep me from owning the stock for its latest spectacular run. I felt the Chattable Trust already had too much semiconductor exposure, but I've been kicking myself for the entire move that diversification has cost my trust a lot of money. Here's the bottom line. Dr. Lisa Su has orchestrated one of the greatest turnarounds in history at AMD, arguably maybe the greatest of all time. And I see no sign that it's going to stop anytime soon. Mad Money is back after the break. Coming up, should you be turning to high yield stocks in this dicey market? Not so fast, says Kramer.

22:19He's explaining next.

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24:00Not too long ago, whenever the economy hit a rough patch, investors would park their money in the so-called safety stocks. Nothing offered more safety than a bountiful dividend. As those stocks came down, along with the rest of the market, their yields, of course, would grow even larger. And eventually, that would lure in buyers. In those days, a big dividend was like a trampoline underneath your stock. But lately, high yielders no longer represent safety. If anything, they represent complacency, even danger. Because who cares about a juicy dividend when the 10-year is paying 5.24 % virtually risk-free?

24:38When rates are high, dividend stocks simply can't compete with the bond market. We've seen this over and over again this year. Just look at the five highest yielders in the S &P 500 right now. We'll go in descending order. Start with Vici Properties, VICI, a real estate investment trust with a nearly 8 % bountiful yield. This is a company that originally owned the real estate under a bunch of casinos. But over the years, it started expanding into wellness resorts, bowling alleys, water parks. It became a messier story. Doesn't help that the core casino business looks pretty dicey right now. With gas prices skyrocketing this year, it feels like a bad time to go to Vegas.

25:13Meanwhile, Vici Properties has seen its growth slow to a crawl. We're talking low single digits. LSD. Really, the only thing this stock is going for is its sky high, 7.93 % yield. But with the stock down nearly 18 % year to date, that dividend sure hasn't offered much protection, has it? If you bought it when its stock say yielded 6%, well, now you have no idea what to do with it now, do you? Second highest yield is General Mills. The packaged food kingpin, 7.3 % dividend yield. Last week, Mills reported a solid quarter reaffirmed its full-year forecast. The stock initially rallied 1 % response.

25:46Makes sense. But then it fell 2.8 % the next day and then dropped another 3.4 % the day after. Now, maybe Wall Street didn't like that they failed to raise their guidance. Maybe people were turned off by the company's declining sales and earnings or the fact that it's being hammered by high input costs. And then there's always the existential GLP-1 concern that no one seems to be able to beat. In the end, General Mills' stock fell more than 7 % last week. It's down to 28 % year-to-date. If you bought this one-time safety stock, hoping the dividend yield would protect you, well, you have taken a serious beating.

26:25Next up, there's United Parcel Services, UPS, 7 % yield. This iconic shipping stock has spent the past four and a half years working its way lower, lower, lower, torn apart by labor disputes, lost Amazon business, and furious competition from FedEx, which has proven to be a better operator, which is a big reason why we are telling CBC Investing Club members to buy it down here. As a result, UPS has been seeing falling sales and earnings for three straight years now. The business was finally supposed to stabilize in 2026, but then we got hit with the Iran war that sent oil prices through the roof, and now the Federal Reserve is hitting the brakes on the economy.

27:01The stock's down 5 % for the year, and that's 7.1 % dividend yield. Cold comfort. How about no comfort? The fourth highest yield in the S &P, brutal, Edison International. The California-based electric utility, 6.8 % yield. This one's down 26 % over the last month, although nearly all of that's from what happened to the California legislature, which killed a plan to partially protect utilities from wildfire liability. That's not Edison International's fault, but I think you'd have to be crazy to bet on a California utility year, no matter how big the dividend yield might be. You can't trust that legislature in California to do the reasonable thing for everybody.

27:37Finally, the fifth hottest yielder in the SPF is intriguing to me. It's Kraft Heinz, another iconic packaged food company, 6.8 % yield. Of all these dividend stocks, I do think that Kraft Heinz actually has the best story because it's now run by Steve Kaling, the man who broke up Kellogg and made his shareholders a fortune in the process. I actually I think he can do the same thing at Kraft Heinz, although he wants to get the core business stabilized before even thinking about a breakup. K.L. Lane's spending heavily on advertising to breathe new life through his brands. But this could put a little pressure on the bottom line there.

28:10At the end of the day, I'm optimistic about Kraft Heinz has dropped 8 percent over the past month. So, hey, what exactly is that 6.8 percent yield protecting you from anything? There's simply no safety in these so-called safety stocks. Why is that? Like I mentioned before, a lot of this comes down to the fact that dividend stocks are sinners in the hands of an angry bond market. Right now, the 10-year is paying you more than 5.2 percent. And Wall Street seems pretty convinced that treasury yields are going to keep heading higher. That's brutal for higher-yielding stocks because bonds are their natural competition.

28:42Let's say you like, I'll give you a good one, Letter O, Realty Income. It's a fine retail-focused real estate investment trust. Pays a monthly dividend, yields 5.9 percent. That yield offers an attractive premium versus the 10-year for the moment. But if you think the 10-year is headed to 6%, then real income is not worth a second look. No wonder its stock is down nearly 10 % so far this month, and it's a good company. The other issue is that many of the high-yielders just don't have enough growth, and some have developed reputations for cutting earnings estimates in recent years. That's especially true for that packaged food stock.

29:13But they're not alone in this. Who cares about a high dividend yield if the earnings estimates are coming down? Now, if things get bad enough, the company might even, yes, cut the dividend. And that's something that doesn't happen with Treasuries. Of course, anytime you buy a high-yield, you need to worry about the possibility of a dividend cut. Often, super high yields are a signal that the payout simply can't be maintained. They are true red flags. But lately, that abstract concern has become more real, as several high-profile companies have indeed slashed their dividends, including some that I think really were on record as never wanting to do it.

29:48The Campbell's Company was the latest, cutting its dividend by 36 percent earlier this month. Before that, the stock had been yielding 6.6 percent. Now, I thought that dividend might be sacrificing. Another package food company, ConAgra Brands, was yielding north of 10 percent for it. It cut its dividend in half in July, with very few exceptions. A double-digit dividend yield is a major red flag. Whirlpool has struggled for years amid a tough housing market and suspended its dividend early entirely in May. Every time something like this happens, it calls into question the safety of high-yielding dividend plays and reaching for yield, which is something I never like to do.

30:19So here's the bottom line. There was a time when high yielders were the ultimate safety stocks, but that's no longer the case. Instead of safety stocks, these have become some of the most dangerous stocks in the market. Safety first. I say that, but in this case, safety last. And buyer, beware. Lou and Farnelou. Hello, Mr. Kramer. Thank you, thank you, and thank you for taking my call. I appreciate it. I love your show. You're fantastic. Thank you, Lou. Thank you. I've been watching you for years over and over, and it's just entertaining. It's fabulous. The energy. You're terrific. I still try to bring it.

30:58You know, it took a week vacation, come back and get charged up again. What's going on? Oh, nice. My question is on Pepsi. Everything's down in the drains right now. It seems attractive to me. But, you know, I have to appreciate your genius, Gene. And I wanted to call you on regarding this. I'm thankful you did, Lou. I actually had a conversation with Jeff Marks, who runs the Chamber Trust with me, about PepsiCo. I felt that it would be beneficial to, when it got to 5%, maybe take a position. But if you take a look at the stock, what it's telling you is down 10 % per year, that the dividend may not preserve or act as a trampoline I once thought it would.

31:43Why? Frito-Lay. The business is a tough one right now, and people don't want it. The only one of these stocks that I saw that was really having any luck here is Procter & Gamble, and that's because it has nothing to do with food. All right. Surprisingly, these high-yielding stocks just don't offer safety anymore. In fact, they're some of the most dangerous companies in the entire market. Much more mad money than what we'll take to reignite Costco. I'm taking a look at the latest quarter for clues. The naysayers are back for SpaceX, and I'm not having anything of it. I'm giving you my take on how this company can keep powering higher.

32:15An order calls rapid fire in tonight's edition of The Lightning Round. So stay with Kramer.

32:29For a while now, Costco's been stuck in a funk, making it one of the most frustrating names in my charitable trust. Stock's down over 6 % over the past six months. appearing with the S &P 500 up nearly 21%. This underperformance is crushing me. So I was relieved when Costco reported a seemingly strong quarter last Thursday, one that sent the stock up nearly 3%. But even though renewal rates improved, a chronic concern, membership growth is still slowing. And that's a major issue for a company that lives and dies by the size of its membership base. Makes the money on the card. Don't get me wrong.

33:01The headline numbers were pretty darn impressive. But Costco sells for more than 40 times earnings, which means the numbers need to be pretty much perfect, especially in an environment where you can collect a 5 % return almost risk-free by parking your money in a 10-year. Plus, PE multiples historically get crunched in a rising rate environment like we have now. Now, I've stuck with Costco for the Travel Trust because I'm a big believer in their business model. And for years, that was the right call. These guys offer the best bargains out there because they buy a relatively small number of products in extreme bulk.

33:31Their Kirkland Signature private label brand is incredible. I regard Costco private label as being superior to the branded version, both in quality and on price. I think the annual membership fee at$65 is a steal. So is the Costco City Visa card, by the way, which is more than competitive cashback rewards. Plus, it's just a great place to shop. I mean, I don't know if you've been to Costco lately, but when you see the packed parking lot filled with a surprising number of Beamers and Benzes, you wonder how the heck the stock could be such a dud. So what's the real worry here? All right, first, let me give credit where credit is due.

34:05On Thursday night, Costco reported a healthy top and bottom line beat 15 percent earnings worth worldwide. Membership renewals increased to 89.8 percent, with the U.S. and Canada rising from 92.2 to 92.3 percent. Now, that may not sound like much, but a lot of investors have been worried about weaker customer retention. Executive memberships, which cost one hundred thirty dollars, double the normal card, reached a record forty two point three million people. But they now account for 75.6 percent of sales because that executive membership deal pays for itself as long as you do enough shopping. And maybe that's why my wife spends so much money there.

34:39But in this big but, Costco's total membership growth slowed again. They finished the quarter, which was the final quarter of Costco's fiscal 2026, with 84.1 million members. That's up 3.8 percent year over year. That's below expectations. Total membership growth was 5.2 percent in the first quarter of fiscal 2026. 4.8 % in the second quarter and 4.1 % in the third quarter. That is a disconcerting cadence. Membership fee income rose 7.3 % to$1.85 billion. That was a little light. Now, Costco's membership base under 40 has grown nearly 60 % since COVID, currently representing more than a quarter of the total.

35:19Magnum says these younger members initially spend less, then grow into bigger spenders over time, assuming they stick around. The concern is keeping them as customers. See, younger shoppers are more likely to join online. And online signups renew at lower rates than warehouse signups. Costco offers incredible bargains, but you're going to end up missing most of them if you don't go to the store. Like that good deal for new Apple phones that I would expect to get from T-Mobile. I'll get my second line, which will be for the duo, from T-Mobile via Costco, if they keep offering low prices for Apple products as they have in the past.

35:52The web business is very strong, with digitally enabled same-store sales growing 19.5 percent. Website and app traffic up about 30 percent. Shopping numbers robust, too. Total same-store sales rose 9.4 percent. Wall Street was only looking for 9 percent. Most stores would kill for those numbers, but a lot of that was from gasoline. Comparable traffic increased 3.3 percent versus 2.4 percent in the prior quarter. Adjusted average ticket also rose 3.3 percent. Great number. Lots of strength in home furnishings, small appliances, and housewares. Costco estimates it saved members more than$3.2 billion versus average gasoline prices in its markets.

36:27They make very little money at the pump, but cheap gas brings in customers. Still, putting it all together, that slowing membership growth is a real problem. And I am not hearing a convincing strategy from management about how they can get younger online-focused members to re-up. They sound too comfortable, complacent even, seem to assume this problem is going to resolve itself. You know what? If you're going to pay 40 times earnings for a stock, that's not enough. You need management to give you a clear plan. Even great companies can get blindsided when a dependable business model starts changing.

36:58They often assume the warning signs will just disappear. Don't get me wrong. I have tremendous respect for Costco, which is why we still own this one for the Chabell Trust. I just wish they'd address the membership growth slowing issue more directly. Fortunately, I think there's a solution. The Wall Street Journal recently captured Costco's treasure hunt appeal with a reader who went in for toilet paper which is a huge seller for them, and left with a trampoline. Okay, that's the experience I want younger online members to discover. Costco could test a simple offer. Sign up online and receive a coupon for a$50 rebate after you visit the warehouse twice.

37:33Give people reason to come through the doors, then measure whether they shop more often and renew at higher rates. Of course, these incentives cost money. I'm not saying they're bulletproof. I mean, it's just my plan. But something needs to be done to lock these people down. Get them to commit. Taste the free samples. Eat the$1.50 hot dog. Get a delicious roasted chicken. Those are really good. I'd rather hear management discuss a concrete plan to build that habit than assume that younger members will eventually behave like their parents. The company has the merchandise that's got the value. They just need to get younger members in the store so they can see how terrific they are.

38:05Now, there's a reason that after the quarter, eight different firms cut their price targets, despite the upside surprise, versus just one that raised its price target. That tells you how demanding the expectations have become. A good quarter doesn't automatically justify paying more for Costco's earnings, unlike most companies. That's our dilemma with the investing club. Look, we own the business we admire, and this quarter gave us reasons to stick around. But at 40 times earnings, it's an Achilles heel, which is why I rate the stock a 2, a whole for the Travel Trust. And we lowered our price target from$1 ,100 to$1 ,050.

38:37At just under$923 a year, frankly, I'm not interested in buying anymore. maybe in the 800s or if management gives us a clearer plan to choose membership growth. Here's the bottom line. Like the late, great Charlie Munger, Warren Buffett's old partner, I remain a Costco addict. But younger members need a stronger incentive to make that trip and discover that value for themselves. When they shop online, they just don't see all the incredible bargains. They don't partake in the treasure hunt experience. If Costco can give them more of a reason to show up in person, I bet they'll keep coming back and the stock will shake off the 900s and power much higher.

39:12Everybody'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.

39:30It is time. It's time for the lightning round. It's time for the lightning round. It's time for the lightning round. And then the lightning round is over. Are you ready? Ski, dad. Tell the lightning round, Chris. Let's start with Ken in Michigan. Ken. Dave, relatively new to the club, Jim, but I want to thank you for the education. My question today is Super Micro, F-M-C-I. Okay, Super Micro is an inexpensive company. It looks like it, but I'd rather tell you I think there's major structural problems internally in that. That's why I like Dell, which has really been a monster. Let's go to Brian in California.

40:11Brian.

40:15Brian? Hello, Jim. This is Ometree Brian and a proud club member. This is Ometree Brian and I'm a proud club member and I've got to tell everybody, you are honest. You handle yourself with integrity and I am so proud to be a part of your club. Oh, thank you, man. Well, you know, integrity means you've got to admit you're wrong. When I'm wrong, I put a flag up when I'm right. Hey, that's good, too. How can I help? Well, and you were right on James Cook. All right, this thought is an underappreciated play on AI power valve in it. The backlog booking acceleration is extraordinary, and the capacity expansion could unlock another enormous earnings setup, like exometry.

40:56This is Fortune Power Solutions. Thank you, Jim. You know, I happen to like Fortune Power Systems very much. I think maybe people don't like this. It sells 27 times earnings. But I'm with you. And I think you described it very well. And I thank you for the kind words. Let's go to Chris in New York. Chris. Hey, Kramer. What's up? Booyah. Booyah. What's up? Calling about Symbotic. That's why, yeah. Okay. Okay. Now, this is a good company. Actually makes money, but it sells at 100 times earnings. I can't get behind anything like that. Now, I know that multiple seems in play. Here's the issue. Once again, Expensive stock in a rising rate environment is something I can't count.

41:36I can't count this. It's too likely to hurt you. Let's go to Ken in Texas. Ken. Jim, this Thursday, I'm going to get a significant position in Vylor when it spins out of Corteva. Should I hold it or should I get rid of it? You know what? I have not looked at that company and I must do that. I feel it's just too dicey for me to say yes or no. Let me do some homework on that one and come back to you. Let's go to Jason in Massachusetts. Jason. Hey, Jim, the Super El Nino probably means a warm winter. Amid a trade war with Canada, the snowmobile manufacturer now yields almost as much as a 10-year treasury at 5.2%.

42:19Polaris, Jim? No, Polaris, you know, this is a good example of a situation where the yield's high, but that's because it's worrisome. And I'm not going to go with Polaris. As a matter of fact, I'm going to go against players. I don't want to touch it. And that, ladies and gentlemen, is the conclusion of the Lightning Round. The Lightning Round is sponsored by Charles Schwab. Coming up, Kramer's taking aim at SpaceX's doubters and breaking down why the stock is ready to launch. Next.

42:53Booyah, Jim. Your integrity makes you the booyah saint of Wall Street. Booyah, Jimmy Chil. Booyah, Jimmy Chil. Booyah, Jim. Quadruple. That's a lot of booyahs.

43:18The nitpickers never stop. I got pushed from Oracle this weekend about how retail investors buying individual stocks are first class idiots. The real theme seemed to be that home gamers have no right to buy stocks. If they do, they're all gambling fools. The fact that more and more individuals are selecting individual stocks, 20 percent of the volume of all stocks versus 10 percent not that long ago, indicated to the author there's just way too much speculation. They think these individuals better get ready for some real big losses. And it's a crying shame they don't stick with index funds. The author didn't stop there.

43:49The chief indictment, individuals were swarming to buy perhaps the most overvalued stock on Earth, SpaceX, the profitless$2 trillion behemoth run by Elon Musk. The author claims it's a classic example of what happens when you let individuals run amok and buy anything they want regardless of the fundamentals. I'm calling BS. There are perfectly legitimate reasons to believe that SpaceX could have an incredibly bright future. What makes me say that? Well, let's start anecdotally. Let's start with my trip to Italy that just concluded. We own this house in Tuscany, and after a completely outrageous electric bill, our next biggest monthly charge has been the spotty, inconsistent, totally maddening Wi-Fi bill.

44:27We rent the place out, and any renter these days demands uninterrupted phone calls, high-speed Internet, and all the cable they can handle. For that, we were paying$200 a month, and it wasn't good. It was terrible. It got so bad that we were losing valued customers because of the ridiculous Wi-Fi cable situation. Yes, it's that important to people, and it can't keep going down. We complained repeatedly to anyone who would listen somehow, despite the egregious language barrier it got through to them. because one day a man in a uniform who represented Starlink showed up and told us that we could get everything we wanted for$50.

44:59I was dubious. Nice house. How much drill are they going to do? How unsightly? It was only on this latest trip that I even found where the satellite dish was hidden, deep in the woods. Saving$150 a month wasn't really as important as keeping paying clients. Small price to pay, and man, is it fast. Coming home, I knew I had an eight-and-a-half-hour trip, and I had eight-and-a-half hours where the books and shows all downloaded, But all I really wanted was to watch the NFL football games and not that game cast version. Luckily, somehow, in the last 10 days, the airline had gotten Starlink. Suddenly, they lose with live football every game.

45:32I didn't even want to get off the plane until at least I saw that the Cowboys were beaten. Now, I know that my experience won't be everyone's experience, but Starlink's an incredible service. It's my favorite part of SpaceX, even if it's not the most important part. The more substantive business decision to buy a huge number of GPUs from NVIDIA is already paying off. as Elon Musk is renting them out to Google at an$11 billion a year run rate. And he has a similar deal with Anthropic at a$15 billion run rate starting in October. That's$2.17 billion a month just for renting out some compute that Elon Musk had the vision to know to buy.

46:05But wait, there's more. When Musk first started talking about putting a data center in space, I mean, it was a laugh line, right? Last week, though, Jensen Wong, in an interview with New York Times' Ezra Klein, He said power is so important, so expensive, they maybe got to take these orbital data centers seriously. I know it sounds crazy, but the way Jensen casually mentioned it made me feel like the doubters would be the ones with egg on their faces. Sure, you'll need a bunch of rockets, but SpaceX just launched a new starship into orbit today where it deployed 26 Starlink satellites. Who else could do that?

46:35I think the real win for Musk will be humanoid robots, but that's Tesla's business. Still, though, there's nothing stopping him from merging Tesla with SpaceX. Call me an optimist, but the combined company could end up making a lot of money someday. The electric driverless cars, the robo taxis and the batteries all could be long term wins, but nothing in the order of robots. I read lots of stories about how robots could cost as much as 20 ,000 piece. However, I have no doubt that Elon Musk will drive that price down. GPUs for hire, rockets, Starlink, robots, driverless electric cars, batteries that can hold charges longer than most.

47:08Who knows what that's all worth? but I can tell you this, anyone who thinks that it can't be worth much much more than it sells for at least is thinking too small. It's not reckless to imagine a much higher stock price for this company if you have patience and a longer term vision. Doesn't mean you need to buy SpaceX now. There's still a ton of restricted stock that will be hitting the market over the next year. But the business, it's good and it will only get better over time. I like to say as always the bull market is on my prime center event just for you right here on Mad Money. I'm Jim Kramer.

47:38See you tomorrow.

47:42All opinions expressed by Jim Cramer on this podcast are solely Cramer's opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by Cramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Cramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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