tv Fast Money CNBC April 26, 2012 5:00pm-6:00pm EDT
i'm melissa lee. after-hours action, lots of big earnings action. breaking down all the big movers and monitoring all the breaking news from the conference calls this afternoon. plus, we're trading what one analyst calls a little amazon, staples. the secret growth story you should be investing in right now, and we'll get the view from 30,000 street with the jetblue ceo. this is "fast money." let's start trading and get to the big surge we're seeing in after-hours trading beat on the top and bottom lines. jon fortt with the latest on the
call. >> that's right. amazon doing quite well. expecting to come in at 12.9 and came in at 13.82, interesting quality issues that i turned up digging through the numbers from equity method investment activity. they were positive, $89 million. a year ago, they were negative $17 million. because their margins are so thin and that gets included in the eps number that we go with, that's actually a significant contributor along with their -- their great performance sales-wise in north america to this eps beat. without that 89 million, they would be significantly lower in eps. their cost of the total operational costs came in at 12.91, 12.92, so if they hadn't done better in sales and hadn't had that equity method investment activity they wouldn't have had positive eps and they did so that's why their stock is up after hours. >> that's one of the reasons it's up. the real reason it's up, as significantly as it is, is operating margins. i mean, it doesn't sound like a
big number, but their operating margins came in at 1.5% which is probably about five times larger than the street was looking for, so not only did they crush on the eps side, but they are actually running their business apparently more efficiently, so when everybody was telling you to sell the stock back in february, and we talked about, you know what, not so fast, now is probably the time you take some profits. you don't go chasing this tomorrow, but i think amazon valuation and all is still looking pretty interesting. >> jon, in terms of that one little item, the equity accounting, does that -- is that factored into the analyst expectations? >> i don't believe it is. >> okay. >> now, i was looking back over a few different quarters. equity method investment activity, goes up and goes down depending on what amazon investments are doing, things like living social. i can't tell exactly what this is. i haven't been able to dig that out. maybe there's some other analyst out there that wants to call in and let us know, but i'll check in on with that.
>> jon, thanks for the update. operating margins, 1.5%, held steady from the first quarter, a year in which capital spending doubled year on year. >> i wouldn't want to poo-poo the numbers. they had to be on the trade lines, anything north of 13 billion on the revenue side was going to be a big win for these guys and it was. people thought even because it was hard to clear the quarters, first-quarter comps up 45%, not as difficult of a clear. this is a very good beat and 140 times, we talked about it last night, you know, a lot of us on this desk were very skeptical but a stock they want to own. not one i want to own because i don't invest in stocks like this. key levels on this stock. we're back to neve on this stock, and i don't know how it breaks through the next level. again, i was wrong on today's numbers. >> how much do you think this is short covering in the after hours? >> a huge part of it. the stock, as guy pointed out, drew all the way down to 1.80, and now it's trading 2.20 in the post. you've got a lot of people who short it just on valuation.
shorting valuation, by the way, don't work if you have the numbers wrong, so the other big part of this, you have 41 analysts that cover it with buys and only one sell so you'll have like the circus of positivity coming out in the morning and the hedge funds know it. they have to cover. >> just a guy's point on the margins though. they are running their business better and added more third-party resellers and that's a really high margin business for them so they are changing the mix a bit. they spend billions last year building out warehouses so they can get stuff out very quickly. i know when i order something and i ask for two-day shipping it comes the very next day. >> there you go. >> that's certainly working very well. i like this company. i know the valuation is very high. >> i bet you ordered that tie for tonight's show. >> i did. it's a pierre cardin. >> order it yesterday. >> it's a shame he didn't get that one wrong. >> want to go to mike murphy who is playing the role of the contrarian for us tonight. mike, what do you see in amazon's results? >> well, first of all, b.k., i like the tie here. >> thank you. >> the stock, amazon, i don't think you can buy here. i think the stock is way
extended. if you look, people are chasing it up here, a lot of short covering but this stock should trade back lower. it's not going to stay up at 75 times earnings, much lower. >> to talk to what mike and what we're talking about on the desk is definitely important that they have beaten five out of the last eight quarters, whether that's good or bad but the stock has gone up two out of eight quarters so going into this people really bet, as keith said, against this stock and as mike said you wait for your opportunity to wait for this thing to peak out tomorrow's activity. >> people look for the miss this. company is not afraid to miss, to be clear. this company has missed three of the last ten quarters, and it's a big, big hedge fund trading stock so just know that. >> interesting no reaction as well to amazon's guidance to the current quarter. it said it could post an operating loss in the current quarter. they have done that though, this is the third time in as many quarters, so people are becoming inured to this very conservative guidance. >> great word, nice job. >> i try, you know. >> welcome back, by the way. >> thank you. >> i missed you. >> i've been saving up inured. >> on the plane? >> yeah. i've been thinking about all the
words i need to use. >> hike it's going to be a big show. >> huge. >> can't wait for the next word. i have a few words that i've been saving up. >> i'm sure you have been. amazon again trading sharply higher in the after-hours session. jon on the conference call bringing you the latest as it hits. more after-hours action. head into starbucks, the coffee giant falling more than 4% despite expectations on both the top and bottom line. you know what, the stock has been trading near all-time highs going into the earnings, so, therefore, the beat wasn't as big as was needed in order to keep the stock -- >> 100% agreed because they didn't really say anything that awful. they mentioned commodity problems which you and i both found interesting, but i think it was just -- they are basically a victim of their own success i think. they needed to crush. they didn't do it, but what they said was pretty good. look at china comps up 18%, which was much better than expected. you know, they are accelerating their growth in terms of stores, so i think this is when valuations are starting to catch up. i think starbucks on this
pullback, you know, over the next couple of days is a stock you've got to own because i still think it's a tremendous story. >> you've got to be price sensitive on this stuff. we're full disclosure along. it also said don't buy it into the quarter. between 61 and 57, you've got to be price sensitive. and by the way, there was some hair on the quarter. on the top line they missed the european number by a good 300 basis points that. matters s.europe, you know, being bad? a surprise to people, maybe, maybe not but the point is there's very little room to wiggle here with expectations this high. >> want to address the headline you're seeing at the bottom of the screen. s&p downgrading spain's credit rating to triple b-plus. >> i'm not sure this will really be a surprise to the market. spain's ten-year bonds have been pretty wide recently. i don't know if it's that big of a deal. we all kind of knew, that you know. i think it's all right. >> and just from, you know, this has been as much of a macro trade, guys who can, will and have pushed around spain, they don't have to refund until july so they have refunded, first of
all, 48% of their total outflow for this year are and they don't have to go into the market until july. i think from a news flow perspective, that's very important because people have been looking at the headlines on these deals and the turnover and the demand and the tale, and actually you wouldn't have the follow through. >> bottom line, it won't be a negative in the european trading session tomorrow? >> i would argue that the ibex did a flip two days ago and i would be long the ibex. >> brian is at the market desk for us. >> i'll give you the details, the press release. two-notch cut, by the way, from aa and a minus, talking short term, long term. bbb plus. a couple of reports on the credit rating downgrade to spain. they are also cutting their outlook to negative, by the way.
we believe the kingdom of spain's budget trajectory will likely deteriorate against a backdrop of economic contraction, in contrast to their previous projections. we see an increased likelihood that spain's government will need to provide further fiscal support. the question i would have is where do they get the support? do they have the money or do they need to go back to the ecb, the troika and they are cutting the outlook and credit rating by two notches. they call significant risks to the spanish economic growth and budgetary performance and that those will have an effect on the credit worthiness of spain's sovereigns. two-notch cut for spain. >> brian, thanks a lot. can you see the reaction. there is some reaction on the trade on the euro, though slightly, keith. >> the euro has upside momentum because ben bernanke is torching the u.s. dollar so there's a relative trade going on. separate that from what brian just talked about. not inconsequential that spain is crashing. by the way, it was down 22% as of two days ago, as an immediate
turnover trade sold. that's the february 9th level basically, so you don't want to be a professional knife catcher on that. at the same time, germany has said explicitly spain and italy too big to save. now, have you to think about that in the context of the greater union. germany being very vocal about that and germany is starting to break down too. >> let's move on here. we should note that jane swells on the starbucks conference call and she will bring us the latest developments. we want to get to the buzz kill, deckers share getting hammered down 18%. shoe-maker hurt by warmer weather. who wants to wear uggs when it's warm outside? >> wouldn't you be wearing crocs? isn't that a better look for you. >> i wear the crocs in the snow. >> deckers cut their guidance, part of the reason why the shares are down sharply. one man is brave enough to step into the stock on the after hours on the big pullback and that is, he is, dr. j. >> a couple other guys on the
desk and gals, if she could trade it might. stock is down 17%, 18% in the after hours, folks, so they missed earnings, yes, they did, and it was a warm winter, but i just don't understand why you wouldn't want to own this stock at 56 where i was able to buy it in the after hours. 56 and 56, 57. that's actually a decimal point there, 56.57. those are the two levels i bought at in the after hours. i like it to bounce tomorrow morning from these oversold levels. does it deserve to be around 60? probably, but 56 just seemed too cheap, melissa. >> so you're playing this simply for the balance. >> that's all i'm playing for it. >> what's your final take? >> no unusual activity. after hours it's unusual because trading nearly full-session volume now in the after hours. again, that's where the pros play. >> right. >> and that's a lot of institutions disc this stock. >> let's say people think, you know, the weaker margins are really terrible, and they are not going to give a bounce to the stock tomorrow. how do you manage that trade. >> i'll be out of this thing by
the time "squawk on the street" finishes tomorrow. how about that, wow? >> very, very short term here. >> keith? >> there's a ton of meter version in this trade. can you get a bounce to 56 in a new york minute. all you need is somebody to get positive and a sell side upgrade, and you've got it cheap. >> what's going to happen tomorrow is this is one of those classic things where it will trade four, five times normal volume. remember, there's probably a 25%, 26% short interest in name. a lot of folks will cover and a lot will add, but it will turn over enough where you get a very definable short-term bottom so keith and doc's point so that's how you trade it. with that said, the guidance was an atrocity so this is a stock with a huge run from '09 to basically the middle of last year and has somewhat fallen off a cliff. my sense is there's still farther room on the downside but tomorrow for a couple of days it's worth a trade. >> murphy, how you trading this thing? >> i'll take the other side. don't go near this thing. too many other stocks working right now, looking at a starbucks buy that on a slight
dip. to jump into deckers because it's down 17, 18, don't do it. i think can go a lot lower. >> the stock was 120, to guy's point, what, october of last year, so i really like picking it up on the dip for a bounce. also expedia blew out numbers. we can talk later. >> dr. j, always good to see you. thanks for bringing your trade in the after-hours session. next trade, where is all the fear gone? the vix continuing to fall again today, down 15% in the last three trading sessions. its worst performance since march 13th. keith, the s&p 500 is where, close to 1400? >> 1399. >> the last time were you on you said the vix was a sell sign at those levels. >> if you believe it's the 1990s have it. if you think it's 2003 to 2007, have at it with that. i don't think it's either. at the end of the day between 2008 and today every time the vix has gotten between 14 and 15, you take down your gross exposure and not long exposure so if you're long star walks at 16, just selling someone the vix
at 15 or lower. it's very simple. keep it simple. >> b.ks, what's your final take? through most of the earning somebody and most of the dow components were at great levels. >> we're great levels and the market is being driven by buybacks and by dividends. look what companies are doing, beating earnings. sure, they are not hiring yet, but they are beating earnings, having increased dividends, increased buybacks. companies don't do that unless they have some kind of confidence that at least their business will stabilize. if you can get some stabilization out of europe, these companies are set to do very well. i think we have much more upside here, and i would caution on the vix because when you look at the volatility of the vix, it's at a 100%. so if you're trying to buy the vix as a hedge, you're not going to make any money, even if we do crash. the only thing that people haven't priced in here is a melt up, the deflation, the big crash, the worry about that has been priced in >> i mean, at the end of the day we've got to go back and rewind the tapes. april, by the way, for every sector in the s&p 500 other than utilities is down. so if you go back to that period
late march, early april, that was the right call so you've got to really think about growth slowing and whether or not you believe companies like cat because they can change their mind. >> got to take a break here. coming up, we're continuing to monitor all the action in the biggest after-hours action. dave barger ceo of jetblue and his interview following the company's earnings today. more "fast money" just ahead. >> 15 minutes of fame, we can't promise that. what about 15 minutes on "fast money," go to tout.com and submit a video question for the traders. we'll play the best questions on air, download the tout app to your smartphone or submit from your computer hash -- #askfast. introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day.
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on the hill of jim chenos revealing he's short the stock. anybody in coinstar? no? >> no. i think this is another opportunity. if this stock was short in the after hours, this is an opportunity. not a huge valuation. their full-year guidance was s disaappointing. they may be sandbagging, but i think coinstar has been a name that's been fantastic. they win to netflix losses, i believe, so i think coinstar, if it dips, it was down around 64.5 was when i walked here and i think that's an opportunity. >> that's right. if the fundamentals are there, shorting something on a cheap stock like that when there's no support broken, it's going to be a herculean task to get paid. there's 25% short interest in the stock, okay? you've got to really think about that and think about that hard. jim chenos has been on tv talking about it. no catalyst, get it out of the way. >> mike, what do you see in the options pits? >> this is a stock with well-above movement. we actually talked about it in one of the earlier shows just
saying we thought that was a good move to sell, implying over 7%, and obviously looking like it will move much less than that. this is why these types of strategies, when you get into this situation and jim chenos talking the stocks down propelled people to go out and buy the puts and they bid it up too much, this is where some of that implied move can really make sense and this proves it. >> social game developer zynga reporting better than expected earnings. according to facebook, singa accounts for 11% of its revenues. are the companies inseparable? what does it mean for zynga? let's bring in an analyst at webb bush securities, he's got a lowdown on the quarter. mike, what did you make of the quarter? >> in line with what they expected. they beat our gap revenue estimate by $1 million. the bookings were about 3 million higher, earnings a penny higher so exactly what would you expect. they did a secondary at end of the quarter. clearly, they weren't going to miss. there was nothing to tell us they were going to crush, and they didn't. they passed through the omg pop
acquisition in guidance and added a little tiny bit so they raised guidance by about 50 million bucks. they kept their earnings rake about the same. i mean, it really is about as plain vanilla in line as you would have expected. >> michael, the big problem i think with this stock has real been the corporate government shroud. we're not going to accuse them of anything other than the fact that people have been very confused and wished they were a little more transparent so speak to that, and how do you feel? >> you know, they are a new company and they are run by a bunch of guys who haven't had kind of public face being, you know, street facing public roles before. i think they are all learning as they go. i think the transparency is a tough one here because, to be honest with you, i'm not sure if they were perfectly transparent about everything that the analyst community could interpret the data and tell you what it means. this is a new industry for all of us. we're all kind of learning as we go. i think that there's a misperception on the treat that there's a direct and immediate correlation between user growth and revenues, and we're seeing
today that's not true. i mean, kind of average slightly up revenues and big, you know, increases in users, so what we need to understand is how exactly do users turn into paying users, what does that happen, and i think zynga is afraid that's giving away too many trade secrets. truthfully, they do this better than anybody, and i don't think they want to share their secrets with anybody else. >> if it's not the number of users, are you getting data that users are spending more time online and therefore a probability of converting to pay users? >> i think the metric is the average paying user, and i think you'll see it's on a game-by-game basis. you'll see a citiville go from 0 to 150 million users and decline to 50, but as it declines to 50 more people are spending more. it's the people who are stuck and left there playing who are paid the money. so when citiville drops again to 30 million users, even more people are paying. it goes from 1 million to 2 million to 2.5 million and
that's the secret sauce zynga doesn't want to share with us. they don't want to tell us how to do it. the only way to figure it out is i have to play all the games, what had a chore. my wife wants to leave me because she cannot believe i spend so much time and she thinks i'm addicted and have 45-year-old housewife friends. >> and you do. >> just kidding. >> they are all her friends, too. >> michael, thanks a lot for your time. we appreciate. it always a pleasure to speak with you. >> pleasure. >> b.k., i don't know if you're one of the core users like michael. >> i am not. >> mrs. b.k. is not threatening to leave. >> you this whole sector i find very difficult to analyze. mike sal an expert and he can't even really figure out how they monetize this. for me it's reminiscent, not saying it's a bubble, but reminiscent of bubbles where everybody is focused how many users we can get, some day we'll earn money off them and you get stocks that are bid up.
that's something i want to stay far away from >> he said that on tv because he knows the game. he said i have to play. >> he knows his wife -- >> this is all about virtual games. probably has six wives at six other virtual universes around the world. >> that's terrible. >> that's grounds for divorce. >> is that like cheating? does that count as cheating? >> as far as i'm concerned. >> cover microsoft. >> coming up -- there's at least one retailer that hasn't been phased by the brick and mortar blues. how one chain is keeping up with the times to the tune of $11 billion. that's right after this break. how can you just stand there?
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starbucks, down 4.25% or so in the after-hours session. let's check in with jane wells who has opinion monitoring the conference call. jane, what's the latest here? >> well, they are talking, they are going through the categories right now. howard schultz earlier on the call says this quote, seismic shift that we've seen in the consumer behavior over the last few years is here to stay. he went on to talk about how great things are in china in the company. just came back from china last week. he said what they have seen there in china is their core customer has transitioned from the ex-pat or tourist to now the actual local chinese customer, and for this reason they are increasing the number of stores they are going to open there this year in that region, and the china asia-pacific region from 300 originally to now 400. half of those will be in china. they actually had their first family -- partner family forums in china last week where partners of starbucks in china brought their parents. starbucks was actually pitching to the parents why starbucks is
a good career opportunity for their children. they also plan to speed up the introduction of the single service espresso machines there to 2013, much earlier than anticipated, and he also talked about the evolution fresh. they finally opened their first store. he said the early results. he says the category of the premium cat igory. howard schultz calls it a 3.4 billion category and he says it will become another billion dollar starbucks brand and despite all that stuff he says coffee remains at the center of what we'll do. what i want to hear more about are the commodity costs. company says in its release they expect to have $230 million in additional commodity costs pressuring the results this year. that may be one reason why the full year earnings estimates that have been raised mistreat
expectations. the company says most of those extra commodity costs have already impacted the first half of the year, and they should start to ease. back to you. >> jane wells, thanks so much. people out there, i was wondering this at first. coffee futures at or close to two-year lows here and there is a lag here of how they hedge. >> they must have screwed up the hedge because, again, commodity costs, i thought i saw in a headline there will be a second half tail wind and to me that's upside, that and the channel distribution, the "k" cups. my guys don't leave the office, they drink all the free stuff in the office. >> is that because they are cheap? >> i'm paying for it. >> in terms of the hedges, you're explaining to me. >> it's the timing of the hedge so when you have, again, a hyper momentum stock, straight up to the right it. almost looks like apple. again, the timing of the hedge, a lot of, you know, individual investors look at the price of coffee and automatically say that this ledge will compute automatically, second half of 2012 and first half of 2013 so
you just have to wait. >> that would tell me it may be a buy at this point. >> i think it is. this is starting to be the theme from everybody, that china is growing very well, at last the chinese consumer. apple did very well and starbucks saying you're doing well. the bigger companies like a cat tractor not doing so well so i do think starbucks is a buy. >> am zorn shares down 14% after topping estimates on the top and bottom line. let's go out jon fortt and get the latest on the call. >> kindle fire, pleased with the growth so far. customers are buying a lot of content, particularly in north america. they said kindle fire was a big part of the media growth number from q4 to q 1. media growth being one of the reasons why they beat on revenue. sounds like it's time to stop thinking of the kindle fire as something that breaks even or losing money. we're starting to see media actually pull revenue through for them, you know, on this product. >> all right, jon. thanks a lot. check in with you a little bit
later. meantime we like trivia here. >> what have you got? >> here's a question. who is the second largest online retailer behind amazon? >> i know. >> i know, too. >> you guys are looking at cheaters. >> the answer is staples. the company did $11 million in sales online last year. leading our next guest to call it a little amazon. joining us is keith goddard, president and ceo of capital advisers. keith, a pleasure to have you with us. >> hi, melissa. >> it may be a little amazon, and you may be able to make the comparison but a lot of people if they had to choose a stock a year ago, they would have said and the better bet would have been amazon, so in what other ways in terms of the stock price could it be the little amazon at this point? >> well, the biggest way is not a little amazon is in valuation in spite of the fact that it surprises people to know that staples is the second largest online retailer in the world. you're looking at a stock that trades ten times earnings, ten times free cash flow and offers a dividend yield of 10.8% versus
amazon which is 70 times earnings and no dividends and before i trash amazon, the capital growth fund owns both stocks, but we like staples a lot. >> hi. it's brian kelly. so in staples, you said something about 40% of their sales are now coming online which leads me to think that they may not need all the stores that they had. amazon's advantage is they don't have the store, so in staples, do they own or lease those stores? when dose dow those leases roll off, and do they need to have that much real estate? >> well, you know, 40% of their revenue is still north american retail. they get 20% international, 40% online, so the stores are important, and they are also an important component of their overall distribution infrastructure. staples can -- can reach 95% of the north american population within one day with the delivery, so they have a combination of retail and, you know, their own trucks in addition to fedex and ups, and through all of that
infrastructure they actually have a more efficient way of reaching their business customer with a kind of interaction that a business customer needs, better than amazon, so, you know, amazon may try to get into the space and they will have some success no doubt, but it's different than trying to capture market share and things like media and electronics. those are better suited to -- to amazon's distribution and business model. >> keith, i'm with you. the valuations are a compelling 3% dividend give or take, so get inside the head of a trader. why are shorts continually leaning on this thing? i think the short is up to 7% so for me for that type of valuation and that type of stock is rather large. >> well, we've been through a sluggish economic period, and there is a surprising amount of cyclicality to the office supply business, so things like high and stubbornly high unemployment aren't good for accelerating same-store sales, you know, with the european economy so weak,
stateles is struggling with negative same-store sales, negative comps in europe. so we believe that incrementally things are getting better for staples, but could i see the argument that, you know, there might be a -- an opinion that says we expect another weak same-store sales numbers so we'll short the stock but we think things are getting incrementally better. >> thanks for speaking with us, keith goddard. coming up next, dave barger, ceo of jetblue in his first interview since the company posted earnings today. that's another cnbc exclusive, and that is right after this break. fro omrevi htalielzeping t a neigbrhbooklyn..or.ho financing industries that are creating jobs in boston... providing funding for the expansion of a local business serving a diverse seattle community... and lending to ensure a north texas hospital continues to deliver quality care. because the more we can do in local neighborhoods and communities, the more we can help make opportunity possible.
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♪ come fly with me, let's fly, let's fly away ♪ >> welcome back to "fast money." we're live at the nasdaq market site. jetblue, reporting soaring profits. record revenues were driven by higher fares and traffic offsetting fuel costs that were 23% higher than a year earlier. jetblue ceo dave barger is on the fast line joining us for an exclusive interview and, of course, is a friend of the show. a pleasure speaking with you. >> thanks for having me on again. >> this is the first interview that we've had with you since the pilot erratic behavior incident back on march 27th. i've got to ask you. have you seen any impact on
bookings because of that incident? >> melissa, we haven't seen any impact at all, and let's face it, obviously a rather public event, tough situation and -- but we haven't seen anything at all in terms of any type of business issues associated with the event. >> the latest here is that clayton osmon, the pilot in question, is going to rely on an insanity defence and at the same time pilots are given extensive testing and what can you say about jetblue's testing and whether or not it would pick up insanity on him or not? >> i know him very well, one of our very senior pilots this. event that took place, we're obviously of the opinion, of course, we're waiting for the experts in terms of a medical situation and we'll see what plays. we're supporting the captain and family and obviously i think the professionalism for the customers speak for itself in terms of how the event transpired in amarillo and texas. >> let's switch gears and talk about the quarter. in terms of expansion, dave,
where do you see expansion next for jetblue? >> we are growing, and we're contrarian to the rest of the industry. you look at the consolidation going on, this merger and acquisition activity. a lot of it on the back side of bankruptcy, and we're going to stay with our current plan, our organic growth and own people and airplanes. specifically most of it will be down in latin america. the caribbean latin america this year and a little bit in boston and that's where our focus is in 2012 and beyond. >> dave, to at least expand, whether it's through organic or acquisition, the balance sheet's always a big guy. you guys have de-leveraged a lot in the last couple of years but when you look at latin america, what kind of a cacheback program is it for you? there are opportunities, someone like golinas with a lot of opportunity. >> we totally strengthened the balance sheet in a significant way when i look at our trailing 12 months, our cash on hand, strongest in the industry as we
close the first quarter, and with all that said we've -- we're running the business based on return of investment capital so the quality earnings, profitable growth. in fact, it was really nice to purchase an aircraft with cash in the first quart they are year and we plan to do the same over the course of the rest of the year. think of latin america, maybe not into deep south america at this point, the caribbean, san juan is the focus where the largest airline in the commonwealth of puerto rico and northern central america and a little bit of mexico is working for us quite well. >> it's guy. the airline industry, is it an impossible industry to flourish in given the environment that we're in the last 20 years and the next 20 years? >> guy, appreciate the comments. 1914 the first airline between st. petersburg and tampa attempted to make a profit doing this. we're 100 years later and the united states, the business aggregated hasn't been profitable, let alone let's talk about free cash floor or roic so we'll stay the course from the standpoint of this contrarian
model, offering a product, direct cultural relationship with our staff and a strong financial sheet. i believe, guy, that will be the difference in the long run. you look at history, we're definitely playing the contrarian role right now. >> dave, always great to speak with you. dave barger, the ceo and president of jetblue. we should note jetblue hedged 26% of its fuel needs in the second quarter and experts the average price per gallon of jet fuel to be 3.33, 2012 the average to be 3.30 and that's certainly the key as we've seen fluctuating oil and diesel costs. >> but they have been able to raise fares which has really helped them so as long as they continue to do that and the mix between business and leisure travel, business is a higher yielding product, as lange as they can increase, that they should do all right. at some point fuel costs get to go high and 100% of your planes filled with business travelers, no place else to grow, but for now they are all right. >> how are you trading it? >> when the ceo comes out and is doing a great job and says try itself is challenged, i wouldn't go near jetblue or any of the airline stocks. i think they have proven it's a tough way to make money.
>> all right. let's also stick with travel and check on expedia shares. they are up sharply in the after-hours session. strong earnings report, rate of growth and booking and hotel revenue all accelerated from the fourth quarter, up 17.6% in the after-hours session. >> wow, that's crazy. >> anybody trading this name? >> i wish i was. >> this stuff's happening all over the place, post-apple. >> right. >> 5%, 10%, like 15% to 20%, how do you like that? got a hedge fund community under a tremendous amount of performance pressure, and that's what you're seeing in the stocks. if it ticks and has high short interest that's what you get. >> expedia, 60% of the shares are outstanding. >> not a stock on valuation which makes it different from some people going after it out there. nine times earnings you're not buying an expensive stock. >> one knock on the quarter, their global airline bok bookings were down. they are able to sell more tickets, but they still were down revenue per ticket. >> coming up next. we've got today's trade for one of the biggest earnings reports
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from zynga's earnings call. the social networking company has been stressing the importance of mobile saying it's a real opportunity to increase the number of people who are paying to play over time, especially on the mobile platform, saying most of the growth in the bookings is coming from mobile. they stressed a couple of key areas for growth. casino, arcade, mobile. that's where they see the upside to opportunity. also saying that they are seeing real growth prospects internationally. also in terms of advertising where they have grown revenue 117% from the year ago quarter. melissa, back over to you. >> thanks so much, julia. ford reporting earnings. results could be hurt by slow sales outside north america and a tough comparison to the first quarter of last year. great to speak with you, peter. you say that ford could be the top beneficiary of auto sales surprise to the upside. also the biggest loser if auto sales come in disappointing? >> thanks, melissa. well, certainly monthly auto sales are going to bounce around month to month so it's tough to call a specific month, but overall industry sales in the u.s. are getting better.
i think on top of that though i think it's important to keep in mind that almost half offord's volumes will be new or significantly refreshed in 2012, and fresh product is what drives market share and pricing. the company is also increasing its production capacity by about 15% this year and due to near-term capacity constraints it's cutting discounts pretty dramatically on small cars so i do think there's a story here outside of just the automotive cycle. >> you're expecting an inline quarter tomorrow? >> yeah. i'm cautiously optimistic about the report out tomorrow. stocks are always about sentiment and earnings divisions. the company did a good job a few weeks ago talking down the quarter at the new york auto show specifically citing new york and north america. consensus estimates are probably more or less right-sized but i think more importantly that earnings divisions are nearing a bottom at ford so it's probably a little better out of the quarter than -- than particularly going into it. >> all right. peter, great to speak with you.
thanks for your time. we want to know on the every time half time report alan mulally will give us his views. a look at an option trade on broadcom. >> sure. apple, obviously their largest customer, may be one of the last ways to take a play on their earnings. some of the comps haven't performed so well on the earnings number. this is a stock that typically moves 6.4% on earnings, only implying 5. one situation where we'll take the lower bet and buying options. specifically the one where i'm looking at is the 38, 48 call spreads. sell the 40s against it for 30 cents. it's a net debit of 45%, less than 25% difference between the strikes gives us a good favorable risk reward relationship. if you want to make an upside bet on a stock that's already up 25% on the year. >> b.k.s, been active in the broadcom space?
>> yes and also texan, a name that joe tear nova has been on. a name like text an, buying back stock, good dividend, like them all over and taiwan semi, like that one too, as well. >> all right. more "fast money" coming up next. guys. come here, come here. [ telephone ringing ] i'm calling my old dealership. [ man ] may ford. hi, yeah. do you guys have any crossovers that offer better highway fuel economy than the chevy equinox? no, sorry, sir. we don't. oh, well, that's too bad. [ man ] kyle, is that you?
next on "mad money," cramer has an exclusive with chipotle's big enchilada. get it? that's all coming up top of the hour with the one and only jim cramer. all right, in honor of the nfl draft we had our own draft today for stocks to watch. our own guy adami watched his stocks earlier today. listen. >> with the seventh and final pick aim going to fort worth, texas, a tandy corporation, and it's radio shack. >> going for the shack. >> yeah. well, i have an epiphany. pete and i were in the green room and shaquille o'neal came to say hi to us. >> in the green room? >> on my kids, we're out on twitter, showed it. >> wow. >> radio shack, monster short interest. all the bad news is out. either going to zero or 15. i think it's going to 15.
got to be in it to win. it can't pick microsoft. got to go out there. especially with the seventh and final pick. i put it out there on the line. that's how i roll. >> shaq is in the green room and you think radio shack. love how your mind works. very simple. >> can you imagine if you walked into the green room? i would have picked, can't even tell. >> mike murphy? >> like guy's thinking on it, but this stock i think goes to 0 a lot quicker than 15. >> that's what makes markets, baby. >> but to buy the stock here after it came down from, 6, i think 0 is in the very near future. >> would you change your mind if shaquille o'neal walked into the green room when you were there in. >> that's a question i saw the picture of guy on twitter with shaq. i may, honestly, i may have to change my opinion >> i guess he's that convincing. >> it's kizmit. can i spell that. it's all god feng shui.
>> let's not do this. >> i've got a gig tonight, people. >> all right. are we going to do some tweets here? yes. mark berry tweets to us, anyone dipping to cliffs natural resources? >> no. >> why? >> i'd stick away. if you look at the whole iron ore space, when you're looking at china, the growth is from the consumer, they are clearly slowing down. caterpillar showed it. even seeing slowdown in australia so i'm away from this stock. >> what i would say it's absolutely been a death to see iron ore names. china stepped away from this market. i do think they are back in. the second quart sert trough at least in the near term. >> lower highs since july, goes to 60. >> can starbucks and green mountain coffee co-exist? sounds almost existential. >> that sounds -- what do you say, keith? >> in the end, no. >> in the end no.
>> starbucks is going to do what they need to do in the interim and in the end starbucks is going to go with what they should go with and that's starbucks. >> my guys continue to chew up every "k" cup in the house, they are not going with green mountain coffee. >> but you must have a green mountain -- you have a kuerig brewer so you are saying in your office both co-exist. they co-exist in your office. >> but the product is a lot more important than the machine which is why they give the machines away basically. >> all right. special programming note tonight. carl quintanilla gets a behind-the-scenes look at one of the most popular retailers in america. tune into the premiere of "the costco craze, inside the warehouse giant" at can the p.m., walk you through how toilet paper is tested. really, fascinating, fascinating doc. we'll come right back. stay tuned. >> chipotle seems to have lost
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