Jim Cramer: You Must Be CRAZY If You’re Selling Apple
Apple’s (NASDAQ:AAPL) recent downturn is not cause for concern, according to “Mad Money” host Jim Cramer. Shares fell more than 4 percent on Wednesday, the day after the company announced quarterly results that fell short of Wall Street’s expectations, but Cramer warns, “don’t let the big numbers fool you.”
“I find that if you divide everything by 10, things become a lot clearer. If Apple were a $60 stock, not a $600 one, and it fell $3, you wouldn’t freak out, particularly after what was, indeed, a serious disappointment,” said Cramer. The stock was basically “dinged,” he contended, and that’s no reason to sell.
On the contrary, Cramer notes that Apple is still selling for less than 11 times next year’s earnings, which means it’s still a good deal for buyers.
“It’s among the cheapest stocks I follow, offering phenomenal growth for a price rather similar to many cyclical semiconductor names,” he said. “It is much, much cheaper than any packaged-goods stock I follow, yet the food and household products companies grow very slowly and many have become inconsistent in their earnings reports.”
Cramer isn’t negating the real concerns raised by the company’s conference call, though. “Given that Apple gets about 24 percent of its business from Europe, and it sells expensive devices, you’re going to see a continued slowdown, and we don’t know how much of the reduced guidance is being caused by Europe’s woes,” he said.
Competition is another factor to consider as Samsung, which makes chips for the iPhone, is marketing its own smartphone running Google’s (NASDAQ:GOOG) Android software. The Samsung Galaxy S III is widely thought to be the iPhone’s most worthy competitor to date.
Another concern is that carriers like AT&T (NYSE:T), Sprint (NYSE:S), and Verizon (NYSE:VZ) may not continue to subsidize Apple’s smartphones.
Still, Cramer thinks Apple is a buy as well as a bargain. “We now have guidance that is so reduced, I have a hard time believing it can’t be beaten,” he said, adding that the iPhone 5, which is widely expected to launch in September or October, could instantly revitalize sales figures.
“One of the remarkable hallmarks of Apple is that new iterations tend to be worth waiting for,” Cramer added.
Finally, Cramer pointed out that, while iPhone sales may be flagging, PCs and the iPad are still growing, and becoming cheaper as well. And the Apple TV, already a bargain at $99, may be updated soon, possibly even with Siri’s voice recognition.
“I reiterate that I believe Apple must be owned. You don’t rent it and you don’t trade it,” Cramer added. “I think it will be well worth it as it has been for all the years and years that I’ve told you to hold on to the best manufacturer, the best retailer, and the best technology stock money can buy.”
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