Jim Cramer Urges Investors to Remember Apple is Not Dead
Apple (NASDAQ:AAPL) had a horrible week after earnings. However, Jim Cramer is not ready to recommend selling the stock. Bears are obviously framing the perception of Apple, but Jim isn’t ready to declare the stock dead.
“Without Steve Jobs, Apple is just another stock, it’s not magical anymore,” Cramer said on CNBC. “But that’s okay. Just because it isn’t magical doesn’t mean it’s automatically a loser, especially considering how cheap the stock has become after this shellacking.”
Apple fell to $439.88 to close the week after announcing earnings results that fell short of investor expectations. Although Apple reported record iPhone and iPad sales in the quarter, both revenue as well as earnings growth slowed, suggesting that Apple was finally becoming ‘normal.’
According to Cramer, with Apple clearly off its pedestal as the stock you couldn’t go wrong with, emotionally invested bears are refusing to hear out the argument that the company isn’t quite doomed.
“One thing’s for certain,” he said on CNBC. “Neither you nor anyone else wants to hear that Apple is fine, that it’s inexpensive even after this quarter. That it has huge flexibility with nearly $40 billion in cash — and that things will work out fine. This stock is way too emotional and even though that’s exactly how I feel, the coliseum wants red meat.”
There are several reasons for the recent high selloff that has resulted in the stock falling from its record high over $700 in mid-September. Firstly, a lot of buyers of the stock did so when it was on an upswing and did not realize how the stock market works. “The market cares about gross margins — how much money is left over after the cost of every dollar of sales,” Cramer pointed out.
Here’s how Apple moved in 2012:
In addition, some investors bought in based on the stock chart, which “kept going higher and outran price targets.” That resulted in analysts raising their targets repeatedly, but as the stock started falling, “the charts became your enemy, not your friend.”
Meanwhile, easily-impressed investors assumed that Apple was a smartphone market leader that could not be touched, and they were now finding it hard to accept the fact that Samsung (SSNLF.PK) was a worthy rival whose devices were “good enough so customers don’t necessarily have to pay up for the iPhone.”
Another important factor contributing to the sell-side domination is the fact that long-term holders of the stock have been taking profits on it. “After the incredible run, it’s only prudent,” Cramer said. “Many sellers have simply been worn down by the price action, which has been hideous.”
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