Jim Cramer ups Apple price target to $300

Apple Store“Jim Cramer told the viewers of his ‘Mad Money’ TV show Tuesday [that] it may seem counterintuitive to recommend Apple (AAPL Quote) after the stock had a monster $10 move today, but this is just the beginning,” Scott Rutt reports for TheStreet.com.

“With Apple currently only representing 3% of cell phones and 4% of computers worldwide, Cramer said this is only the beginning of a huge move for the company. Cramer said he expects to see the iPhone dominate the cell phone market, just as the iPod did with portable MP3 players,” Rutt reports. “Apple currently commands a 70% market share in the portable music market.”

“Given the huge potential at Apple, Cramer said he’s raising his price target from $264 a share to $300 a share,” Rutt reports.

“He said investors should be willing to pay one times the growth rate for a high quality growth company like Apple,” Rutt reports. “That translates to 30 times Apple’s estimated earnings of $13 a share, or $390 a share. Cramer said since everyone would think he’s nuts to suggest $390 a share, he’s using a conservative price target of just $300 a share.”

Full article here.

32 Comments

  1. Cramer has his show because he is radical…and sometimes he wins.
    If he is to do something radical, then he has the best chance of winning with APPL. This is the same guy that said the Blackberry Storm/Bold was the “new babe magnet” and to buy RIMM and sell AAPL. He won when RIMM split, but lost longterm. He’s a bozo and gambles with other people’s money.
    The Street would push Apple off a cliff in a heartbeat on any downturn.

  2. Look at the BS Cramer was pushing October 19:

    “Your game plan next week is to buy Apple Inc. (NASDAQ:AAPL) on weakness on Tuesday morning,” Jim Cramer said on Friday’s “Mad Money” TV show. He told viewers that Apple analysts will likely be ****disappointed with the company’s earnings**** when they report on Monday, due to a little known problem with iPhone production that might keep numbers lower-than-expected. He said the glitch was taken care of at the end of the third-quarter, which will set up Apple for a solid fourth-quarter. Cramer advised viewers to act quickly and buy Apple on Tuesday before AT&T;Inc. (NYSE:T) reports on Thursday because they could follow Apple’s quarter with positive comments about the iPhone that will send Apple shares right back up. “All other data points in next week’s game plan, frankly, dwarfed by this Apple trade,” Cramer said, “and it is a trade I want you in.”

    This guy is a con artist.

  3. I think Cramer is a jerk.

    Having said that, what he said last nite, was actually pretty lucid for him. Basically, he said he thought Apple could make $13 a share non-GAAP next year and he applied a PE, equal to the company’s growth rate, which for Apple, he said was 30. Thus, 30 times earnings of $13 non-GAAP is $390, but his target is $300.

    He explained away the $90 differential down to not wanting to have people think he was crazy. Okay, maybe that’s weak, but he’s correct. If he had put a price target of $390 on Apple, people would say he’s crazy. Of course, they already think that.

    Rather than shoot the messenger, even though we’d like to, let’s just look at his assumptions.

    Can Apple make $13 a share next year, non-GAAP? Yes. They made $3.12 this past quarter. They made $9.61 a share this year, non-GAAP. $13 is only 35% greater than $9.61, so, it’s certainly possible.

    Does Apple deserve a PE of 30? The average S&P500;company has a PE of 15. Strong growers are rewarded with higher PEs, with 30 and higher not unheard of. Certainly on the optimistic end of the spectrum.

    However, even a modest PE of 20x earnings of say $13 a share would get you to $260, not counting cash of almost $40 a share, bringing you up to $300. It’s not that ridiculous if you look at the numbers, and if Apple were to launch a new product line, then who knows.

  4. @ Anonymous

    Perfectly correct and agree. What will matter most, and what this last recession taught me, is that the underlying economy needs to be more robustly on the mend.

    Even though Apple has performed wonderfully over the past year, the underlying economy caused its share price to dive to 78 bucks, all the time Apple doing better and better and better. It never made sense.

  5. “the underlying economy caused its share price to dive to 78 bucks, all the time Apple doing better and better and better. It never made sense.”

    As per my earlier post, the economy did not cause the stock to dive to 78 bucks, market sentiment caused it to go to 78 bucks. With the amount of cash on hand for AAPL, there was no way any rational business analysis could have justified a $78 dollar price, even in a “depression”. It just happened that there were more people selling the stock than buying it at the time.

  6. @quad core

    one thing steve has learned from google is don’t split the stock. It does nothing for you. A high share price helps keep the traders out of the stock which leads to a more consistent upward trend as long as the fundamentals are good. Googls is in the low 500s and is not splitting. Don’t expect apple to split unroll they are at least that high. Who cares: 100 shares at 200 are worth the same as 200 shares at 100.

    And what does this have to do with the topic of this story anyway?

  7. @critic, thanks for the clarification.

    I’m still wary of these kind of pronouncements. The last time I heard them was when AAPL was last around $200, and it seemed the only way was up. Then it dove to $120 (and this was pre-GFC).

  8. It was this kind of crazy talk and expectations that helped Apple fall from near $200 a share to less than $100 – what just over a year ago?

    Not that I would want to be short on Apple right now… but I’m not too sure how long I will stay in my long position.

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