Cramer's Mad Money- Has Starbucks Caught Up with Itself? (1/26/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday January 26.

Is Starbucks Too Hot? Starbucks (NASDAQ:SBUX), McDonald's (NYSE:MCD)

After delivering a "piping hot" quarter and seeing a gain of 214% year over year, people are saying Starbucks "has caught up with itself." Cramer remembers the same thing was said, almost word for word, about McDonald's (MCD) in 2004, when naysayers said the burger giant was all played out before the chain reinvented itself and made a huge expansion overseas.

Cramer would take some gains in Starbucks, but expects it to be a repeat of the McDonald's story as the coffee company revamps its menu, focuses on customer service and expands its presence abroad. Its successful VIA instant coffee brand is going to be launched overseas where there is a larger market for instant coffee than in the U.S. Starbucks has also taken a page out of McDonald's book and has developed a regional support model for its stores in Europe and Asia. Another plus for Starbucks is the return of its CEO Howard Schultz, who is committed to expansion into China.

Starbucks has a 16% growth rate that is increasing and trades at $22.54, well below its high of $40. Cramer says investors have not missed the move in Starbucks.

Is Apple Too Ripe? Apple (NASDAQ:AAPL), General Mills (NYSE:GIS)

After delivering a stellar quarter in which the company saw 50% combined profit growth from all of its products, Apple might seem to be overhyped going into its release of the Tablet, and some may be tempted to take gains. Cramer expects profit-takers and shorts to ravage the stock after the release of the Tablet, but he urged investors to take advantage of declines to buy "the fastest growing stock I follow." He continued; “Now, I believe that Apple can revolutionize how we watch and listen to anything entertainment. That’s what the Mac is about; that’s what the iPod is about. It is what iTunes is about where you pay to get this stuff; it’s even what the iPhone is about. These are devices to deliver intellectual property of every single kind."

Cramer's price target for Apple is $300. Its multiple is only 17, which is the same as that of General Mills (GIS), a company that is growing only half the rate of Apple. Companies that have the same growth rate of Apple have multiples of 25 or more, and Cramer thinks his $300 target for the stock may be, if anything, too conservative. Bottom line: Investors should take a bite out of Apple.

Technical Difficulties: Apple (AAPL), Amazon (NASDAQ:AMZN), Intel (NASDAQ:INTC)

Tech saw a fantastic year in 2009, but the fate of the sector is changing as institutional investors are starting to sell on high volume trading and buy on low volume trading. Cramer says the charts show that big money is leaving tech and smaller investors who are committed to buying should do so only with caution. Amazon (AMZN) was one of the first stocks to crack, sliding below its 50 day moving average and was followed by a selloff of the Nasdaq.

Is it too early to buy on dips? Cramer says tech stocks haven't finished falling and he would recommend waiting for further declines Those who can't resist buying should buy only small amounts, and buy more as stocks decline further. However, he still believes in Apple (AAPL) and thinks Intel (INTC) is too cheap to sell. But the bullish story for tech seems to be stalled for the near future.

Mad Mail: Chipotle Mexican Grill (NYSE:CMG), Modus Link Global Solutions (NASDAQ:MLNK), Allos Therapeutics (NASDAQ:ALTH)

A caller stumped Cramer on lightning round with Modus Link Global Solutions (MLNK). After doing tesearch, Cramer found that this tech company which helps companies deal with their raw component inventory and which reported a good quarter is too risky because it lacks a catalyst and has already risen 523%. He would sell the stock.

Cramer told another viewer not to panic about insider selling in Allos Therapeutics (ALTH) and thinks the CEO just wants to diversify. Another viewer was worried that Chipotle Mexican Grill (CMG) is buying back stock when it "should" be using extra money to grow its stores. Cramer responded; "Typically I would say, yes, to that, but a lot of companies spew off so much cash that they can afford to do a buy-back and not slow down. I would put Chipotle in that category."


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