Cramer's 'Mad Money' Recap: Stick With Growth (Final)
Cramer said when it comes to valuation, eBay is just far too low. Visa has a marketcap of $99 billion, while MasterCard tops out around $56 billion. Yet for eBay, the entire company is only valued at $51 billion despite the fact that PayPal only accounts for 38% of the company's revenues.
Shares of eBay may be just off their 52-week high, but Cramer said trading at just 13.2 times earnings with a 12% growth rate and $4.50 a share in cash, investors can buy into PayPal and get the rest of eBay for free.
Slicing AppleSometimes the Wall Street research machine gets it wrong. And when they do, Jim Cramer will be there to call them on it. Such was the case with Apple (AAPL) , a stock that sold off 11% ahead of yesterday's earnings due in large part to one Wall Street analyst after another issuing warnings that the company couldn't possibly make its numbers.
Cramer called the analysis of Apple one of the biggest screw-ups he's seen in decades, as analysts struggled to come up with sales estimates that were even in the same ballpark as what the company was able to deliver. There wasn't a single analyst that was forecasting Apple's staggering $2.26 a share earnings beat.
So why did the estimates go so horribly wrong? Cramer said that first off, Wall Street was taking its cues from U.S. wireless carriers who didn't activate as many iPhones as expected. Some analysts also questioned whether U.S. carriers would continue to promote the iPhone as heavily or offer such generous subsidies on the device.
But Cramer reminded investors that Apple now sells the iPhone in 100 countries via 230 carriers. U.S. carriers, he continued, simply aren't important any more. As for carriers promoting other phones, Cramer said that also doesn't matter, since customers want the iPhone. "It doesn't matter what the carriers promote," he concluded.
Then there's the iPad, where sales were up 150% year over year. Here analysts took their cues from part suppliers who cited huge inventories of chips. Surely that means that Apple isn't selling many iPads, right? In fact, Apple couldn't make enough iPads to fulfill demand. As for all those extra chips, the parts supplies simply made too many, affording Apple better prices to boost margins.