Mad Money w/ Jim Cramer 9/30/26

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1:18Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer Arca. Other people who make friends, I'm just trying to save a little money here. My job is not just to entertain, but to put it in context. So call me at 1-800-743-CNBC. Tweet me at Jim Cramer. This is a frozen market in the sense that you got to let it go, let it go. Devotees of Disney will recognize those lyrics from frozen. And boy, are they applicable to this economy. Market after market is getting frozen right now, and that's killing stocks. Sometimes you get a mixed day like today. They had Dow dipped 444 points. S &P dropped 0.25%.

1:54But the Nasdaq gained 0.24%. Still, they've become less and less common. The way I see it, we won't get the big rally I'm looking for until we learn to let it go. That means the war must end. The retreat in oil must happen. We have to shelve the rate increases, and we've got to bring rates down. Until then, the freeze is on. What do I mean by frozen? Let's take the housing market. Mortgage rates just keep going up and up right now. The national average for a 15-year mortgage is 6.70. Do you know exactly five years ago that rate was 2.32 percent? You want a 30-year? The national average is 7.34 percent.

2:32Exactly five years ago, it was 3 percent. That is outrageous. Look, this isn't Jim Cramer's made mortgage, but rates have frozen the market all around the country. I need you to put yourself in the heads of potential homebuyers. Maybe they bought a home five years ago with a 3 % mortgage. Now they have a child with another one on the way. The typical starter home may be too small for that. Normally, they'd be searching for a larger home. But now that mortgage rates have surged, they literally can't afford to move. If you have a 30-year mortgage that you got 3 % on, right, your interest rates payments, get this, they will more than double if you try to get a new house.

3:11Who can afford that? The nearly 7.5 % mortgage has made housing the least affordable it's been in 40 years. Even as the price of a new home hasn't moved up all that much of late, that's what I call a frozen market. And keep in mind, housing punches above its weight in the economy. A housing transaction, even if it's just for like a dollar amount, and doesn't require a lot of artificial intelligence, does have a lot of people involved. Salespeople, title people, loan officers, lawyers. Once you get that home, you have so much to do, especially if it's not new. Furniture, appliances, painting, perhaps a roof, maybe a pool, a redone kitchen or a bath.

3:50That's probably a fraction of what you might need to refurbish or to remodel. Impact. Last night, I got a call about QXO. That's a company founded by the very successful Brad Jacobs, the chairman and CEO. I know he's successful because he wrote how to make a few billion dollars in January of 2024 and then followed up last December with how to make a few more billion dollars. So I guess he's successful. The company QXO is an amalgam of beacon roofing supply, Kodiak building partners and top build. They get the top outfit when it comes to insulation and waterproofing. It's number two in roofing and then arguably number one or two in building materials.

4:27The stock was at twenty seven dollars and change earlier this year. It's now at eleven and change. Because this is a miserable time to be a supplier to the homebuilders. Hey, look, the homebuilders themselves are doing very poorly. The stocks of Lenar and KB Homes are down 20 % and 17 % year-to-date respectively. The others are trading water slightly down, although Toll Brothers is only down 0.35%. That's because about 25 % of their buyers pay cash. Toll is the rich man's homebuilder so the customers have less sensitivity to mortgage rates. But the weakness in this industry spreads throughout the entire housing food chain.

5:00Think of everything that goes into a house. There's a reason why Whirlpool just suspended its dividend. and a stock has dropped from$94 to$30. Or how about the pathetic housing retailers Lowe's and Home Depot off 23 % and 17 % for the year, respectively?

5:17Both hit 52-week lows today. Aisle after aisle, these stores is filled with goods that struggle to move in volume. Hammers, screws, lighting, faucets, so many other products that don't sell when the housing market's frozen. Walmart and Costco have been terrible stocks of late. why. I think part of it's housing. RH, the old restoration hardware, is a housing trap. It's going from$745 from rates for half of what they are now to just$121. And by the way, you know, this is a profitable company. The frozen housing market. Let it go. Of course, it's not just housing. How about the IPO market? Just a few months ago, it was on fire.

5:55On June 12th, SpaceX came public to an amazing fanfare. Biggest deal,$2 trillion company. Yesterday, Aura, which makes these very successful health rings, a profitable company, decided to scrap its$2.2 billion offering, citing market conditions. I marveled that the NASDAQ 100 was only 1.3 % away from its highs, yet they're fretting about market conditions. It would have been better if the bankers had said, well, the IPO market is frozen, you can't do anything, but they're not going to do that. You aren't going to see this inspire, one that I was kind of hoping and counting on, The parent of Buffalo Wild Wings, Dunkin' Donuts, Sonic, Arby's, Baskin-Robbins, Cubbon Public this year, that's been shelved.

6:34Any halfway decent stock market could have handled that one. But this market with 40 % of stocks in bear marketery, Tory is hardly halfway decent. The mergers and acquisitions market has been a reliable source of profits for the major banks ever since Trump got sworn back in. But other than Paramount Warner Brothers, it's mighty hard to think of two public companies merging with each other right now. It's almost as if that game is over. One of the side benefits of mergers that the company that runs the S &P 500 gets to pick a new one, a hot stock to put in the index when the target, which is also up a lot, vanishes.

7:08But no deal? Stagnant S &P. Without IPOs or M &As, the huge banking cohort is frozen except for fees, and that's just not good enough. Let it go. We're headed into earnings season, which starts with the banks. What happens if they say our markets are frozen by the Iran war? Business people were loving Trump's antitrust regime or lack thereof. But now they're afraid to make commitments when any day Iran could sink an oil tanker and all hell will break loose. Let it go. Finally, as much as we consider the data centers a growth market and there's been no cessation in the building of them, the politics have certainly gotten ugly, regardless of what we saw yesterday in the White House, when two of the biggest supporting governors, Josh Shapiro in Pennsylvania and Greg Abbott in Texas, Democrat and Republican, have put the industry on hold in their states because they're up for reelection.

7:52and data centers have become a real albatross. It's difficult to see that industry, let's say, have the growth that we thought it would have. And that's the way I have to look at it. It's politically frozen. And I am not seeing anything particularly balls out of Micron's earnings tonight to defrost the story. Maybe let that go, too. Now, there's an alternative reality I'm not losing faith in. You end the war. The price of oil goes down. Inflation goes down. The Fed takes the next rate hug off the table. and we get a face-ripping, lung-snapping bull market move that would bury the short sellers.

8:27It could happen. Might just be three quick days. Perhaps three of the important days of 2026. That's why I hesitate to leave the market at this moment. But here's the bottom line. Let it go. Not if things get unfrozen. Then you get a virtual running of the bulls, a Pamplona situation. But if these markets stay frozen, if the bell doesn't go off, we could be looking at a trip to the slaughterhouse. Let's go to Jerry in Florida. It's Jerry. Jerry, you're up. Yeah, hey, Jim. Yeah, hey, Jim. What about a little bottom fishing with Nike, NKE? You know, I tried to bottom fish in Nike about, I guess it was about 10 points ago for the trust.

9:12Today's 52-week low. I lost money for the trust and it was very painful. I don't want to go back to the well. good guys, but once, burn, twice shy. How about that? Large parts of this market are indeed frozen, so you have to let it go. Let it go until it gets unfrozen. Oh, man, money today. Restaurants are a fickle business, but one founder seems to crack the code by learning meaning into hospitality. Hey, do not miss my conversation with the man behind Gramercy Tavern and Shake Shack Danny Meyer. And what do you get when you cross a data center play with a basketball team? How about a darn good stock performance?

9:47Don't miss my deep dive on Boom Energy. Ed, should you try new public player Reformation on for size? You ask me about it, I'm surveying it. So stay with Kramer.

10:05Don't miss a second of Mad Money. Follow 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 Call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.

10:28The quarter pound of a cheese is made with 100 % fresh beef, cooked when you order it. Then comes the melted cheese, the slivered onions, the pickles, the ketchup, and the mustard. Add hot crispy fries and an ice-cold Coke, all for$8. And if things go well, one loose fry at the bottom of the bag. The quarter pounder with cheese meal, now$8.

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12:03Nobody understands the hospitality industry better than Danny Meyer, who's built an empire in the restaurant industry. Most of you know him as the founder and chairman of Shake Shack. But here in New York, he's the man behind some of the best fine dining establishments in the city. From Union Square Cafe to Grand Mercy Tavern to Manhattan, down here in the financial district. The Modern, where I asked my wife to marry me, has two Michelin stars. For the record, she turned me down flat because I hadn't first asked her dad for her hand. Suboptimal. Grand Mercy Tavern has a Michelin star of its own.

12:35She might assume everything's been smooth sailing for him. But we're talking about the restaurant industry, which is absolutely brutal. So he's had a ton of failures along the way, too. He explains everything in a numerous candid fashion you just don't see from most offers anymore. That's a big part of this new book. What Could Possibly Go Right? The Essential Journey to Scale an Enduring Culture. It's honest, entertaining, and very informative, just like his first book, Setting the Table. These are both must-reads, even if you aren't that interested in restaurants or the trials of running a business.

13:06Earlier this week, I had a chance to speak with Danny Meyer about the book at G.C. Ammo, his excellent Italian restaurant in the Hudson Yards neighborhood of New York City. Take a look. Danny, you did it again. It is remarkable. Setting the Table, I thought, was the best business book that wasn't named a business book. What could possibly go right? You tell us more about how to run a company and how not to. How do you do it? by making mistakes, learning from them, and then hopefully teaching from them as well. Well, you talk a lot about how to make good and bad decisions. And there are, after some great anecdotal information, you do have charts of which I ripped out a lot of them because I intend to continue to develop businesses.

13:51And I need you for how to develop culture, how to develop behavior, and how to develop scale. Well, I think that businesses that you cover every single day probably know more about how to scale than I will ever know. What I really try to do is to try to scale a feeling and let that be the fuel for what scales culture and then let that be the reason that enterprise value gets created. Well, I didn't mean to go into this so early in the interview because it's more specific, but I did find it remarkable that you developed the ultimate scale that we told couldn't be scaled, which is a juicy, terrific hamburger, but you also obviously have the fine dining that's so hard to scale.

14:35How do you balance? How do you balance between? Well, like, you know, honestly, you tried to scale juice. You tried to scale pizza. They didn't scale. Yeah, I made some mistakes along the way, and I think a lot of that was in the days after Shake Shack's very successful IPO. Maybe too successful. Remember what I said? I remember you said that, and I wrote about it in the book. You told me that was going to be the worst day of my life. It was a pretty good day, but you know what? In retrospect, I think you knew exactly what you were talking about. But you know what? Sometimes my instinct is what could possibly go right.

15:11It's not just the title of the book. It's kind of an underlying optimism that I bring to everything. And one of the optimistic things that I believed right after Shake Shack went public was that we could do it again and create that kind of uplift for many people on our team. And so I said to everybody, you come up with a great idea. You come up with a great idea. Let's see if we can make you successful. And we came up with some ideas that weren't so successful, but it was well intended. Yes. And one of the things that I think is classic, you came up with what I thought was, and I went to all your restaurants, that non-tip.

15:47I thought that was terrific. I hate calculating. I always have given 25 % because it's like easy to do a quarter. And I always thought it was an intimidating process. I think you thought others felt that way too, but it turned out we liked to tip. Turned out that people do like to tip. It turns out that servers like to receive tips. I was trying to kind of balance out an age-old inequity that exists within the tipping system, which is that tips are generally not legally able to be shared with cooks. And I didn't think it was fair. Imagine if your beloved Eagles went into halftime behind. I know that'll never happen this year.

16:23It's too close down there. But now imagine if the offense was paid three times as much as the defense and the coach has to make everybody feel great about going out there. That's how it is in the restaurant business where tipped employees can make so much more than non-tipped. And I was trying to write that or at least narrow that disparity. You are, in the end, a great storyteller, which is why I think this is the one that's so right after setting a table. I wrote, you inspire like a great NFL coach. What are your favorite methods for firing people up? And can it really be done at scale? Absolutely.

16:55You don't have to fire up each individual. You have to fire up the people who hired all those individuals. You've got to make sure that the people who you're putting on your team have what we call a high HQ, a high hospitality quotient. So over and beyond the 49 % technical skills we look for, like I want someone to be great at what they do. I'm looking for the 51 % hospitality skills. And we teach anyone who's doing the hiring not to settle until they get someone who's got a high HQ. Yeah, I think the HQ examples that you gave is terrific. But I've got to tell you, what could possibly go right?

17:31Also have examples of what I regard as bad behavior by people you couldn't control. Some landlords who seem to be wrong. Some partners who seem not to be good. So I need to know from you, if I'm a young entrepreneur, how do I know not to partner with certain people? it's hard. You know, we all make mistakes, but I do think that if you enter every partnership, every developer partnership, every employee partnership with your eyes wide open and you say, this is my intention and you really know what your intention is, I think your batting average goes up. And then, you know, one of the things I lay out pretty vulnerably in this book is that I haven't always gotten it right.

18:13And as a matter of fact, I've sometimes hung in there with bad decisions too long because I always believe I can turn it around. I always believe I could make it right. Well, closing a restaurant is monumental to you. You don't want to ever admit that defeat, but sometimes it's good to admit the defeat so you can move on. That's right. That's why I began the book with the antithesis of what I wrote in the first paragraph of Setting the Table, where I proudly proclaimed that I've never closed a restaurant in 25 years. And I opened this book talking about the first restaurant I ever closed, Tabla, because I learned a lot of lessons.

18:50I learned that number one, a 13-year-old restaurant closing is not necessarily a failure. A lot of great things came from Tabla. But I also learned that I should have pulled the plug sooner because counterintuitively, what I was really afraid of was laying people off for the first time. I was afraid of being seen as a failure. That's my own emotional nonsense. what I should have done is to say the worst thing we could do is keep a restaurant going that's losing money because no one on this team that I care so much about is getting a raise for two years that's not fair and we all had experiences I know you could as someone who was in table I had my 43rd there and it was remarkable we were upstairs looking down and all white tape you give you were so gracious to have it we all have good stories about Danny Meyer what he does We know that you have a fondness for Italy.

19:38So we're at this beautiful restaurant. How do these thoughts come to you? So right now we're at Chisiamo, which means here we are. Right. And the idea for the name of Chisiamo came to me because we had planned this restaurant probably two years before the pandemic started. And this restaurant, like any gestation period, had to be born. So it was born in October of 2021. Not only was the pandemic still going on, but we ended up having to close the restaurant a month after it opened because of the Omicron variant. So Chisiyama was my optimistic way of saying we've arrived. We're here. I do love Italy.

20:19What I do with conceiving any restaurant these days is I look at the location and I look at the context of it and I say that's the frame. my challenge is to figure out what piece of art belongs in that frame look we did it in 2004 with shake shack here's the park that's the frame what belongs there we did it with city field center they gave us center field in 2009 they said what's the right solution here shake shack blue smoke el verano paparoso the modern the museum gave us this space what belongs there the modern chisiyama is what belonged here we're in brookfield uh manhattan west and this is an area that steps away from madison square garden steps away from the moynahan train station this is what belonged here most definitely now i do want to ask you a subsequent to what could possibly go right we've had some tremendous food inflation you always deal head on uh with the problems.

21:25If you were to write this book right now, how much would be about food inflation and costs for people? Very little. Tell us why. Because I think that whenever there's apples to apples, every restaurant business in the country, in fact, every business in the country, one way, shape or another is dealing with the uncertainty of what tomorrow's costs will be. And what that does is it actually gives an increased advantage over the businesses that not only run the rest of their business well, but add hospitality. Because when you get your bill, whether it's this big, this big, or this big, what you're going to be judging in terms of value is how we made you feel.

22:05And so I don't think there's anything I would write. It's no fun. We restaurateurs, we hate raising prices. In fact, we hang on to the very last second looking for other areas that we can cut costs, and we do that. But I wouldn't write a whole chapter on inflation. Is there a price that where Shake Shack, where the burgers that are so delicious, they're going to cost too much? Probably for somebody. But at the same time, I think when people bite into one of those burgers and they know the difference in the quality, we're never going to stop serving Angus beef. We're never going to stop having the world's best chocolate in our chocolate shakes.

22:40How about the fries? Were you like, you wouldn't have changed. I thought what you wanted to change them to was brilliant. But people wanted the other fries. Yeah. We believed in this mantra that we have, which is stand for something good. It was supposed to be a double entendre because when we opened just one Shake Shack, in fact, I only had one Shake Shack when I wrote Setting the Table. Now there's over 700 in the world. But when I wrote that, people, the only big complaint we got was the line is too damn long. So we said stand for something good. And part of that mantra was that we're going to always use the best ingredients for everything.

23:13and we got a restaurant criticism from the New York Times that said, why can't Mr. Meyer's chefs in his fine dining restaurants please teach them how to make a good fresh french fry? And I learned a really important lesson. Well, first of all, we retrofitted 35 shacks so that we could cut fresh potatoes. We stuck with this thing for at least a year, despite the fact that all of the public was clamoring to get the crinkle cuts back. And we learned two important lessons. Number one is, while fresh generally is better than frozen, when it comes to potatoes, it's not. It's just not. And the other thing is, let the restaurant critics say what they will.

23:58And in fact, a lot of times they have good input. But you know who else has good input? Your public. And we should have been listening to our guests much more loudly than to one voice who wrote in the New York Times. So true. I want to thank Danny Meyer, Union Square Hospitality founder and exec chair. Maybe you'll show me around here. Let's do it. All right. The book is What Could Possibly Go Right. This is it, guys. You want to learn how to want a business? Coming up, fall is in full swing, but one of Kramer's favorite stocks is still very much in bloom. He's checking up on it next.

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26:30hydrogen into electricity. Perfect for the watt-hungry data centers. Not only that, they're quiet, they're relatively clean, they don't consume much water, and the best thing, you can place them right on site. This is a great way to keep data centers running without angering the locals. Yesterday, Bloom rang the opening bell. What a celebration. Right here at the New York Stock Exchange, celebrating its 25th anniversary. Usually, you don't really learn anything new from this kind of thing. But when Bloom came, the floor was filled with manufacturing employees. The people building the equipment that makes this whole story possible was really fabulous.

27:05Lately, there's been a lot of bad press about data centers. You know that. And they've become politically toxic. But it's important to remember that they've also created a ton of manufacturing jobs. The last time I covered Bloom Energy was about seven months ago. At that time, it was in the 160s. Now, it's just under 277. The stock's up 219 % year-to-date and about 34 % just for the month of September. Over the last three years, it's up nearly 2 ,000 percent. Just an incredible outperformer. You know how hard we work to try to find these. How'd they do it? It sure wasn't done overnight, I'll tell you that much.

27:38Bloom spent years developing these solid oxide fuel cells that can convert fossil fuels or hydrogen into electricity without burning them. Data centers desperately need new sources of power from the town. They've got to do it away from the town's grid, right? I mean, they've got to avoid upsetting their neighbors, sky-high utility bills. They've got to do it themselves. and Bloom's fuel cells can get you there with minimal disruption. The more I think of it, I think this thing may be a national treasure. Imagine you're a data center developer for a second. If you want to connect to the power grid, every politician in the region will come after you these days, right, for pushing up electricity prices.

28:12And the process could take years, even if you subsidize and get electric prices down for the locals. Now, we own a stock called GE Vinova for the club. They're basically sold out through 2030. They make turbans. You can't get more from them right now. But Bloom's fuel cells, one of the latest coffee school management pointed out to an Oracle data center where they got the lights on within 55 days. That's incredible. Bloom is selling dependable access to power on a schedule that helps data centers make money with very little hassle for the rest of the community. What is not to like here? And that's why their customer list keeps expanding.

28:47In July, management said that they had all the major American hyperscalers on board with their technology, along with more than a dozen neoclouds, AI labs and co-location operators. Then there's my fave, Brookfield, the Canadian alternative asset manager. A year ago, they announced a$5 billion financing partnership with Bloom Energy. And this June, they expanded it to$25 billion. That's a powerful vote of confidence from a very smart outfit, Brookfield. You know what? They may be the most experienced infrastructure investment firm on Earth. They're basically financing the deployment of Bloom's fuel cells in order to get around our old and overstrained electric grid.

29:23It's not lost on me that Bloomfield has a big stake in Westinghouse, the nuclear power developer. I think Bloom's running rings around nuclear. How important is this? OK, last week, we learned that Oracle had to send out a force majeure notice for their data center project in New Mexico, where construction's falling behind. Part of that's because they've had trouble getting permits for the natural gas pipeline that would fuel this warehouse full of servers. They don't have enough energy to get up and running. And that's where a Bloom Energy comes in. Their standardized equipment can basically work anywhere.

29:54No modification needed. If one data center isn't ready, Bloom can just reroute the truck to another data center. You have to expect some of these things will get delayed, especially with the recent political pushback. But that's not a problem for the company because they're not wedded to any particular project. And that's one reason why Boom Energy was able to shoot the lights out when reported July. They crushed the numbers. 166 percent revenue growth, delivering a 37 cent earnings beat off a 41 cent basis. Founder and CEO KR Shredar pointed out that it took them 21 years to reach their first billion dollars in annual revenue.

30:27That was in 2022 and another three years to double it. Now they're aiming to double it again in a single year because demand is off the charts and they've gotten much faster at manufacturing these fuel cells. They had to have some real patience to stick with this one. At the same time, Bloom raises full year revenue forecast substantially. And now they're talking about earning$2.55 to$2.85, up from$1.85 to$2.25 in their previous forecast. Now, there's a beat for you. In response, the stock jumped 26.5%, although that's because this thing had gotten obliterated from late June through late July as part of the situational awareness hedge fund implosion.

31:05Bloom was one of the largest positions. But ever since the shakeout, Bloom's gotten its mojo back, and the stock's been on a major roll. In the end, I think situational awareness did have a lot of great picks. They just borrowed too much money, and they weren't disciplined about selling their winners into strength. Now, Wall Street certainly recognizes the opportunity as giving Bloom the props it deserves. The stock does trade at a nosebleed 56 times next year's earnings estimate. It's cheap. But you're going to have to pay up. The secret sauce multiple requires a triple-digit growth rate that Bloom's giving you.

31:37So I don't think it's all that expensive versus the growth rate. Some analysts remain cautious about the valuation. Wells Fargo questioning whether additional turbine capacity could eventually reduce demand for Bloom's higher-cost fuel cells. But given that these turbines are sold out for years, I'm not worried. This objection may be a bit of a canard. Plus, it doesn't hurt that Bloom is now sponsoring my Philadelphia 76ers jerseys. LeBron's going to be rocking Bloom Energy. There's a nice local connection. Its manufacturing hub is in Newark, Delaware. It employs nearly 1 ,200 people. Nice change of pace for a company connected to AI.

32:08Also, a nice change of pace for the Phillies and the Eagles. In the end, I remain very enthusiastic about Bloom Energy. They reported great numbers and offered an amazing forecast back at the end of July. And this is one data center play that doesn't seem like it's going to be derailed by local politics because they're not making customized equipment for each location and not burning, burning, burning the stuff that everybody thinks is ruining the skies and polluting the water. Of course, I'm not telling you to chase a stock this morning. It's tripled that year to date. But the bottom line, let me repeat what I said in February.

32:41Wait for a pullback because you're going to get one. And that pullback will be another gift for long term investors. If you want exposure to electricity powering the AI build out, Bloom Energy remains my favorite way to play it. And keep in mind, electricity may be the number one constraint for these data centers. That's why the opportunity is so enormous. Long term, I think this one can still go much higher over the next few years. Much. They toiled in the vineyard of power for years. The harvest paying off bigger than anyone ever imagined, except for management. They were always true believers.

33:11Let's take some calls. Let's go to Bobby in California. Bobby. Jim, boy, thanks for taking my call. Booyah. What's up? Well, I have a big question for you. Do I want to stick with Nibius, which is up 180 % on the year, or do we want to dump it like Philadelphia Eagles dumped it last week? What are we going to do with Nibius? All right. Apologies to Howie Roseman. I actually like Corweave more than I like Nibius. I know that at the same time I met Corweave, Jenshwung and Nibius. Nibius is a very good company. But we talked to Michael Entrader this morning, and I feel really, really good. Michael Entrader being the CEO of CoreWeave.

33:53I feel really, really good about CoreWeave. And Nebius, it's had such a move, I find it troubling. All right. Watch for a pullback in Blue Energy. Anyone that happens, and they will happen, will be a gift for long-term investors. Long-term. Watch for my money head. Could it be time to take Reformation off the rack? I'm taking a closer look at this newly-debuted fashion name because you asked for it. Then we stuck with a certain name for the club from thick and thin, and now it's finally paying off, and you'll know which one it is. I'm telling you what it is and what kept our conviction level so high.

34:30And, of course, all your calls rapid fire in tonight's edition of The Lighting Round, so stay with Kramer.

34:44In late July, there was a small, quiet IPO from an up-and-coming women's fashion brand called Reformation. And it landed, frankly, with a whimper. The deal priced at the low end of the proposed price range,$15. And the stock finished its first day up just$0.08. A few days later, it peaked at$17 and changed. But it didn't stay there for long. In fact, it's now pulled back to$12. At this point, Reformation is a market capitalization of just over$700 million. It's barely large enough for me to share with you about it. But about two weeks ago, I got a call from Charlie in Minnesota who wanted to know my thoughts on the stock.

35:21And you know that I am not going to cuff answers about even the smallest of stocks to you. You deserve the real answer, the real homework, and we give it to you. Clearly, I've been right to ignore Reformation so far. But now let's come down to$12? Maybe it's worth circling back to. Honestly, I do think it's an intriguing story down here. Reformation is a model. It's reminiscent of the fast fashion brands. A lot of people like to talk about Zara, H &M, Uniqlo, but higher quality and with a sustainability kicker. At the same time, they seem to have devoted customer base to the point where they don't need to do a lot of discounting to get rid of this excess inventory.

35:56Very rare for fashion companies. From 2021 through 2025, about 80 % of their direct-to-consumer revenue who came from full price sales, no promotions. And they're very good at manufacturing this stuff quickly without doing much damage to the environment. What else? This is a tech heavy power business. Roughly 90 % of their sales come from direct to consumer, which includes both their network of 70 stores and their e-commerce platform. Reformation has mostly cut out the middlemen. So they have relatively high margins in this industry. Three quarters of their stores are fairly high tech with dressing rooms that let you digitally request additional sizes or compare different options.

36:34Put it all together, and that's a nice pitch for a woman's apparel brand, right? And you know what? The numbers are pretty solid, too. Reformations had steady revenue growth for a few years now, from 2023 to 2025. Their revenue rose a 19 % compound annual growth rate. And in the first half of this year, Reformations' sales growth has accelerated to 27%. When the company reported its formal second quarter results earlier this month, Revenue was up 24 percent. And management noted that this was their 21st consecutive quarter of double-digit revenue growth. So you're probably asking, well, great growth.

37:10Are they making any money? Reformations had solid gross margins in the mid-60 percent range. In the latest quarter, they came in at 66.7 percent. These numbers have been a bit noisy thanks to the Trump tariffs, the Supreme Court's tariff refunds. But now most of that seems settled. For comparison, Ralph Lauren, which I consider to be the gold standard, has gross margins around 70 percent. Levi Strauss is now in the low 60s. Gap's in the low 50s. If you want a newer age fashion play, Revolve, we used to have him on, also in the low 50s. That makes Reformation pretty darn profitable by comparison.

37:41Even on the most stringent gap basis, they made 23 cents per share in the second quarter with net income of$12 million. Wall Street now expects the earnings to grow to 68 cents per share in 2027, 99 cents in 2028. Nice growth there. We'll see how accurate these estimates turn out to be. But doing some quick mental math, Reformation is now trading at just 12 times its 2028 earnings estimates. That's pretty darn cheap considering the growth rate. How about the balance sheet? As of the end of June, Reformation had$242 million in debt, which ain't nothing versus the$711 million market cap. It also had around$193 million in lease liabilities to rent the real estate for the stores.

38:20But upon further review, I'm actually not worried. See, Reformation has around$77 million in cash and equivalents, which makes its net debt more like$165 million. Plus, the company ranked in about$125 million for that IPO, and they mainly plan to use that to pay down debt. I like that, too. So we've got a decent story and solid numbers. But how does the stock stack up against its peers? Now, if we want to do a valuation comparison, I think it makes more sense to look at the enterprise multiple. That's the enterprise value, meaning market cap, plus net debt, divided by the EBITDA, OK? Reformation is an enterprise multiple of 10 based on this year's estimates.

39:04Trying to get some apples to apples going here. That's a couple turns lower than Ralph Lauren, which makes sense, but it's already much higher than Levi's with an enterprise multiple of 7, or Gap with an enterprise multiple of four. Does Reformation deserve that premium? Well, it has a much better growth rate than Levi's or Gap, but it doesn't have that kind of proven long-term track record. Maybe Revolve Group, the online premium fashion retailer I mentioned, is the best comparison. Another new one with decent growth. Revolve has an enterprise multiple of 13. Reformation is a good bit less expensive.

39:34So while I wouldn't say the stock is super cheap, it's definitely not overvalued at these levels. Now, in a vacuum, I might be pounding the table on this one, But nature abhors a vacuum. In reality, reformation's a fashion play. And we know this can be a very difficult category, especially when the economy's experiencing turbulence. We've seen various up-and-coming fashion brands come public in recent years, from Revolve to Stitch Fix to Rent the Runway, and they've all eventually fizzled. It's a very tough category. Fashion is an area where trends can change on a dime. And something that's hot can cool off overnight.

40:07And that's why a story like Ralph Lauren, which is saying, assess, has such special appeal. for me, and it should for you. Other more fashion-dependent stories like American Eagle and Abercrombie Fitch, they can be real heart-stoppers. But with that caveat out of the way, I honestly don't want any problem. I have no problem. No problem anyone wants to make an investment in Reformation as long as you respect it as a speculative position. Because I think that that's exactly what it is. A tiny women's apparel company that's currently doing pretty well, but could easily get derailed. The bottom line.

40:44I think reformation is an intriguing story with impressive growth and very healthy margins for the power business. It came public at a tough moment. Given the stock's slow start, you have got my blessing to put on a small position on this one, but only again for speculation, because fashion is an incredibly difficult game. Oh, and thank you, Charlie, Minnesota, for bringing this one to our attention. Ned 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.

41:23It is time. It's time for the lightning round. It's time for the lightning round. And then the lightning round is over. Are you ready? I want to start with John in Kentucky. John. Hello, Mr. Kramer. Thank you for taking my call. Of course, John. What's up? I'm looking about some information on MPLX. Okay. I'm in dividend. Okay, look. See, when information on MPLX, just got to go read how to make money in any market. It's a stock yield 7.6%, and they can cover that dividend, and then some. That's the kind of thing I'm looking for. An oil play that gives you a good yield. Josh in New York. Josh.

42:10Is this Captain Craymerica? You bet it is, man. No, it's Admiral. It's kind of like what happened in Star Trek. Became Admiral. What's up? I wanted to know your opinion on Grail. G-R-A-L. They just got an FDA approval last week on a blood test. You know, I've been waiting for that. I've been waiting for that approval. And I said, if it happens, this thing is going to spike. You know, I don't think it's done yet. I think it's like Moderna when it was like a 120. I think this thing can go higher, believe it or not. It's that important. Great call by you. Let's go to Scott in New Jersey. Scott. Hey, Jim, thanks for taking my call.

42:46You bet. This stock is a plan on semiconductor performance optimization and energy efficiency. What do you think about Poet Technologies? You're kind of a dead Poet Society over there. I'm not recommending stocks that are losing money. I can't. This market's too brutal to recommend stocks that are losing money. I'm not done. I'm going to go to Paulette in Louisiana. Paulette. Hi, thank you for taking my call, Jim. course. I've been having this stock for a long time and have not really profited from it very much. Kinder Morgan. I think Kinder Morgan is a stock that's now undervalued. It's come down and it should have.

43:22It sells at 19 times 30. That's too cheap for me. I'm a buyer of KMI. I know it doesn't have the yield everybody wants, but I'm a buyer. Let's go to Josh in Texas. Josh. Josh. Hey. Jim. Yeah, Josh. What's up? I've worked for Standard Aero for seven years now. It's an aerospace company. I know you don't like them. But can you recommend Standard Aero, ticker symbol S-A-R-O? You got me covered. You know, it's an aerospace play. You got to accept the fact that the next move down. Can you do that? If you can handle that, you can do it and then buy it. But you got to accept that. And that, ladies and gentlemen, is the conclusion of the Lightning Round.

43:59The Lightning Round is sponsored by Charles Schwab. Coming up, as we enter the second half of this week, Stick around for more of Kramer's top Wall Street play calls next.

44:20This stealth run in Microsoft has been one for the ages. Remember back in June, the stock was at$349 and many people had given up on it? We thought Azure's web services business had slowed down. We were concerned that it was too set up with open AI, causing confusion about what business belonged to who and how Microsoft is really doing. Most important, we kept hearing that customers weren't willing to pay for Microsoft's CoPilot. That's their AI entry. All of these worries turned out to be either wrong or false, which is why the stock now sits at$513 with a$3.8 trillion valuation. CoPilot has 30 million users and growing.

44:57They're paying. Azure's accelerating, not contracting. Microsoft seems to be separating from the pathetic gang at OpenAI. The adults are back in the room. But the most important story, the biggest change, has come from something that hardly anyone talks about. Microsoft's beginning to recoup its monster data center investment. Those of us who were so troubled by the destruction of its balance sheet now realize that the data center spending might be even peaking, and profitability is beckoning. You know I'm a big believer in Novidius Jensen Wang. He told me several years ago that there could be a gigantic payback on its semiconductors just a few years after they were purchased.

45:33I think Microsoft has now reached that payback period. There's been a ton of skepticism about how the tech titans were spending insane amounts of money to build these data centers. Still are. But it turns out Microsoft had to build them because there are so many customers that are clamoring for them. We stuck with Microsoft for the Chapel Trust the whole way down. Why? Because the one thing I never lost faith in was quite simple. The belief that CEO Sachin Nadella and CFO Amy Hood understood the data center opportunity. They sacrificed the balance sheet short term because they knew those data centers will last a lot longer than people thought, making the investment more than worth it.

46:07We didn't sell because of Satya. We didn't sell because of Amy. We had faith in Microsoft's leadership as not all executives are created equal. It's not dissimilar to meta platforms. Several months ago, we told investing club members that no matter how ugly the stock of meta platforms may be, no matter how much money they seem to be losing their labs, you had to bank on Mark Zuckerberg because he was recruiting a first-class team and must be planning something very, very big we didn't know about. He was. But I misjudged how big it would be. Meta's muse is a game changer for individuals and more important for the enterprise, specifically the 200 million captive Meta business customers.

46:44Gone is their total reliance on advertising. Now it's about paying users who are getting their money's worth with this AI agent. I stuck with Microsoft for the same reason. Sure, it looked bad when Microsoft was at$349 down from$553 in October of 2025. Not so bad now at nearly$513. It was no worse than Met at$520 back in March. Now it's at$725. Was I sweating for club members? Pretty much I sure was. Every morning at the 10-20 morning meeting, every day in just a relentless self-remonstration at our monthly meetings. It probably even got boring. I had nothing that was tangible to say, you gotta buy.

47:22But I did have two things going for me that the others didn't. First, faith in the enterprise, and second, a belief in their leaders. They have a body of work, for heaven's sake. It's longer than a comic book. Go read it. You'd probably make the same decision. I like to say there's always a bull market somewhere I promise I find just for you right here on Mad Money. I'm Jim Cramer, and I'll see you tomorrow. All 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 Kramer on television, radio, internet, or another medium.

47:56You 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. Kramer'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. To view the full Mad Money Disclaimer, please visit cnbc.com forward slash madmoneydisclaimer. Real talent is defined by what people can do, not where they learn to do it. So by stopping at the education section of a resume, you might throw away the perfect hire.

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