Cramer: Apple proves that once it hooks customers into its ecosystem they spend, spend, spend

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Jim Cramer

Scott Mlyn | CNBC

Apple‘s better-than-expected earnings prove that the tech giant has successfully transitioned from being known mainly as an iPhone maker to a services business as well, CNBC’s Jim Cramer said Wednesday.

“A lot of people gave up on the stock because they just viewed it as a handset company,” said Cramer, whose charitable trust owns shares of Apple.

“Obviously what’s happened in the last 18 months … is it’s become much more of a subscription stock,” he added on “Squawk on the Street.” “Once you get a person in the Apple ecosystem, that person just spends, spends, spends.”

Apple shares were 5% higher Wednesday, reclaiming its spot as the most valuable company by market cap, after the company late Tuesday posted earnings and forward guidance that exceeded Wall Street’s expectations. The company’s services business, which includes products like iCloud, Apple Music, and AppleCare warranties, made $11.45 billion, up 16% from the same time last year.

Apple has been placing more focus on its services as iPhone sales wane but individual product lines are still critical for the company.

Cramer, who has long warned investors against selling Apple’s stock, last year mocked numerous downgrades by Wall Street analysts. At the time, Apple was getting flack for lower iPhone unit sales. The “Mad Money” host said at the time that analysts failed to realize iPhone sales were still intact and revenues from services were strong.

“People are [now] looking at the company as much more of a service stream because by 2020 we will see a subscription growth of say 500 million people,” Cramer said.

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