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Cramer's 'Mad Money' Recap: Beat a Path to Navteq
By TheStreet.com Staff
6/1/2007 8:08 PM EDT
"Thank goodness it's speculation Friday," Jim Cramer told viewers of his "Mad Money" TV show, because then he could recommend Navteq (NVT - Cramer's Take - Stockpickr - Rating).
"This $4 billion company, the No. 1 supplier of digital maps used in navigation systems, location-based services and geographic information systems, has been acting like deal bait," he said.
In fact, "Navteq is now rumored to be an acquisition target for Google-icious (GOOG - Cramer's Take - Stockpickr - Rating)," said Cramer, which already uses Navteq for its Google Maps.
Cramer said he's talked about this pattern before with iron company Cleveland Cliffs (CLF - Cramer's Take - Stockpickr - Rating). First comes the rumor that a company is an acquisition target. On that rumor, the stock spikes and people start buying call options. This has already happened with Navteq, he said.
"The third step is, in this dance, someone makes a bid for Navteq," he said. The stock is already a lot higher on rumors, but a "consistent trend in this market has been for the takeover to happen with a nice premium anyway," Cramer said.
And even in those rare instances when there's no takeover, "the stock usually doesn't fall," he added.
In this case, Navteq is a "great play, because Google has already said that it wants the company," Cramer said. "And what Google wants, Google gets."
According to Cramer, "me-too Microsoft" (MSFT - Cramer's Take - Stockpickr - Rating) is another potential purchaser of Navteq.
"Microsoft recognizes that it's barely treading water on the Web. Google's mopped the floor with all the competition, and it's the Internet company, with Microsoft a distant runner-up," he said.
The two companies have been in a bidding war before, over DoubleClick. Microsoft lost and ending up spending "a fortune" on aQuantive (AQNT - Cramer's Take - Stockpickr - Rating).
Microsoft's great new plan, Cramer said, is to "just try to acquire whatever Google's acquiring." He's expecting Mister Softee to make a pre-emptive bid for Navteq "because they're great at being ... followers."
"Speculating on a takeover of Navteq doesn't seem like much of a risk," said Cramer, who said he would never recommend a stock on a takeover speculation alone; the fundamentals have to also be good.
In Navteq's case, it's part of a "happy duopoly," with one main competitor: Tele Atlas. "The best reason to be part of a duopoly is that you get to keep prices high."
"Takeovers aside, Navteq is the big winner from the increased demand for in-car navigation," Cramer said. In addition, a low-cost navigation system is coming out in the second half of the year, "increasing Navteq's penetration and sending its stock higher."
Right now, Navteq is riding higher on takeover rumors of an acquisition. "I think it goes even higher on an actual takeover," Cramer said. |
