Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 22.
Apple (AAPL): Cheap or Expensive?
There is a lot of disagreement whether Apple is "cheap" or "expensive." Deutsche Bank recently revised its estimates for Apple; a few months ago, Apple was expected to earn $13 a share, which would give it a multiple of 20 compared to a growth rate of 16%. With the release of the iPhone 4, the revised estimates indicate that Apple will make $18 a share for 2010, which gives it a multiple of 15 compared to a 19% growth rate.
“So instead of an accidentally expensive stock,” Cramer said, “you’ve got an accidentally cheap one.” This revision doesn't surprise Cramer, who thinks demand for Apple's products has been consistently underestimated. Piper Jaffrey predicted Apple would sell only 900,000 iPads by June, and S.C. Bernstein had a slightly larger figure of 2 million. Actually, 3 million iPads were sold during the first 80 days.
Cramer thinks Deutsche Bank's revised estimates aren't high enough; he predicts the company will earn 19 cents a share, bringing the multiple down to 14 and says there is a potential $65 per share in the stock.
Cramer reiterated his recommendation of C.A.N.D.I.E.S.: [Chipotle Mexican Grill (CMG), Apple (AAPL), Netflix (NFLX), Deckers (DECK), Intuitive Surgical (ISRG), Express Scripts (ESRX), Salesforce.com (CRM)], as stocks which snap back when they are tossed down because of negative headlines or global bearishness.
Cramer discussed Salesforce.com, a pioneer in cloud computing, which takes ordinary applications like e-mail and word processing and operates them from centralized locations on the Web. Benioff discussed the "most exciting thing" he has "worked on in his career," Cloud 2, which takes coud computing technology to the next level. Chatter, a Cloud 2 application which is like a Facebook and Twitter combined, will revolutionize networking for businesses. Users can follow people as well as businesses and data, and can collaborate on projects and share ideas more easily. Benioff said, "The next generation of computing needs the next generation of software." Cramer says Salesforce.com is the best play on cloud computing, which could become a $100 billion industry.
Cramer thinks semiconductors have not been more loathed since 2003 in the wake of the dot.com crash. He sees an enormous disconnect between the performance of the stocks and the health of the companies. Cramer went head to head with technician Dan Fitzpatrick over the Philadelphia Semiconductor Stocks Index or SOX. Fitzpatrick noted the index has climbed 134% from 2008 to 2010 and now is on a precipice which it could fall off of or which could be a floor for further gains. Looking at its daily chart, Fitzpatrick noted a range between 325 and 380. He concluded it is only possible to be bullish if the index rallies 35 points or if it successfully retests its 325 low.
What does Cramer think? He wouldn't buy the entire sector, but likes certain individual stocks, such as Cirrus Logic (CRUS) and SanDisk (SNDK) as plays on Apple, Broadcom (BRCM) and Xilinx (XLNX) as plays on the smart phone and Intel (INTC) as a solid semi in its own right.
Cramer doesn't think the prospect of a BP bankruptcy is simply a horror scenario, but could be a reality. The extent of the destruction, to the environment and to the company, more closely resembles the decline and fall of the asbestos industry than the Exxon (XOM) Valdez spill. There were constant denials that asbestos companies would fail, but one by one disappeared, and before long, the industry was gone. Cramer thinks BP could easily be wiped out as a company, in spite of the denials.
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