We recently published an article titled, Jim Cramer on Netflix and Other Stocks. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other stocks discussed by Jim Cramer.
Recently, Mad Money’s host, Jim Cramer addressed what he called a “ridiculous plethora of sell-side downgrades,” noting that the Dow Jones Industrial Average fell by 0.94%, the S&P 500 decreased by 0.96%, and the Nasdaq Composite dropped by 1.18% on Monday. While he acknowledged the session’s poor performance, he cautioned that paying too much attention to downgrades can be detrimental for long-term investors.
Cramer urged investors not to get overly influenced by the negative sentiment on Wall Street and emphasized the importance of staying committed to strong companies, even when their stock prices experience volatility. He recounted the history of the bull market, stating:
“When I look at the history of this incredible bull market, and it has been an incredible bull market, it’s littered with buy-to-hold, hold-to-sell, buy-to-hold, hold-to-sell. These downgrades scare you out of amazing stocks at levels that may temporarily be too high, but will recover later. If you listen to the downgrades, though, you’ll never recover with it.”
In discussing the challenges investors face, Cramer pointed out that many get rattled by analyst downgrades and might sell their shares in solid companies, which can make it difficult to buy back in later.
“In the last decade, the toughest thing to do is to hold on to good stocks. But analysts and commentators love to take aim at big long-term winners. Their jeremiads have scared so many people out of some amazing gains.”
He observed that complacency can be prevalent on Wall Street, with bullish investors often overlooking risks while bearish ones miss out on potential opportunities. For those considering action based on a downgrade, Cramer advised waiting for a bounce to sell, but he noted that timing such moves is “incredibly hard,” even for seasoned traders.
Cramer emphasized that when analysts downgrade stocks that have already taken a hit and overlook positive aspects, it can create a challenging environment. However, he believes it is still possible to profit. Here’s what he said:
“I need you to understand that when analysts downgrade after stocks have already been hammered, when really good investors ignore the positives, then, it may be a grim time. But not so grim that we can’t make money by focusing on the fundamentals of the companies. And not just the economy, the Fed, interest rates and oil.”
Our Methodology
For this article, we compiled a list of 15 stocks that were mentioned by Jim Cramer during his episodes of Mad Money on October 7 and October 8. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Cramer On Apple Inc. (NASDAQ:AAPL): ‘Own It’
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is a prominent designer and marketer of a diverse range of consumer electronics, including smartphones, personal computers, tablets, and wearables. Cramer discussed Jefferies’ recent downgrade of the stock, which included a mixed assessment.
He discussed that while the analysts expressed a long-term positive view of the company’s unique ability to integrate hardware and software for affordable AI services, they also highlighted that the smartphone hardware needs significant updates for advanced AI, potentially delaying progress until 2026 or 2027. Talking about the analysts’ report, he said:
“Listen to this: ‘We like Apple Intelligence long term as Apple is the only hardware-software integrated player that can leverage proprietary data to offer low-cost, personalized AI services.’
So far so good, right? Then, though, quick pivot to the negative: ‘Smartphone hardware needs rework before being capable of serious AI with likely timeline of 2026/27.’… Jeffries claims the high expectations for the iPhone 16 and 17 are premature and the price-to-earnings multiple is near an all-time high. And you know what? That’s all true.
Apple really is facing some near-term headwinds. The hardware may not be ready, but all this tells me is what everybody else has been saying for weeks now, real issues for the 16. When everyone knows there are real issues, though, you’re going to have a limited window to buy the stock after the expected post-quarter weakness. Unless you believe that nothing good will happen until 2026/27… If you believe that, it means that you think Tim Cook’s authorizing the sale of phones that he knows are substandard. It’s almost as though the entire history of Apple refusing to issue hardware before its time never happened. I mean, it’s like you can’t trust the guy. I say that’s some Joseph Stalin-level revisionist history for you. This downgrade is betting against Apple’s entire culture of excellence. Even when they argue that the valuation is too high, that presumes Apple’s service revenue stream gross margin bonanza will somehow taper off. I don’t buy it.”
Cramer also noted potential benefits from the Chinese government’s economic measures, given the company’s exposure to that market. He mentioned strong sales reported by T-Mobile and said:
“Oh, and by the way, let’s remember [the] Chinese government finally training the bazooka on their flailing economy. It looks like their consumers will get some free money. That’s huge because Apple’s got a ton of exposure to China… With all the talk about the iPhone 16 disappointing, does it matter that T Mobile, one of the biggest sellers of the thing, told me personally that sales are good? I think it should matter… I say own it. Don’t trade it too hard.”
In 2023, the iPhone achieved a significant milestone by becoming the leading smartphone in the market, surpassing Samsung for the first time, according to IDC. Despite this achievement, Apple (NASDAQ:AAPL) still held only 20% of all smartphone shipments last year, which points to considerable room for further growth. The introduction of new AI services and features could substantially increase the iPhone’s appeal and solidify its position in the competitive smartphone market.
The company has shown strong profitability, generating $101 billion in profit from $385 billion in revenue over the past year. In the latest quarter, service sales grew by 14.1%, reaching $24.2 billion, with this category enjoying a much higher gross margin of 74% compared to the 35.3% margin for products.
Columbia Contrarian Core Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) – Despite the stock falling after announcing earnings in late May, Apple regained ground toward the end of the quarter, fueled by the company’s long-awaited AI announcement at its annual Worldwide Developers Conference (WDC). At the conference, the company showcased some of its new AI features powered by Apple Intelligence that would be coming to Apple products and also announced a partnership with ChatGPT. Investors greatly welcomed the announcement of Apple’s AI strategy and the stock surged, passing Microsoft as the world’s most valuable company (although this hallmark wouldn’t last). Beta testing of these new features will be coming later this summer, but the initial promise and excitement looks to be a potential catalyst for an upgrade cycle, as the company looks to persuade users who have had the same smartphone for years to consider an upgrade.”
Overall, AAPL ranks 2nd on our list of stocks discussed by Jim Cramer. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
