“That’s why I always say own it, don’t trade it,” the “Mad Money” host said. “With this quarter, we got yet another reason to stick with Apple, and even after today’s terrific run, I think it will turn out to be a real bargain because of its embrace of the subscription economy.”
Apple reported that iPhone sales, historically its largest source of revenue, plunged 17% year over year. It said that trend could continue, but that didn’t stop the stock’s Wednesday rally. Shares of the iPhone maker gained $9.85 during the session, closing above $210.
Cramer said the company is going through a “paradigm shift” from being a device manufacturer to a big-league service provider.
In its second-quarter report, Apple revealed an installed base of 1.4 billion devices. It yielded 390 million paid subscribers, which could reach 500 million in the near future and translate into $11.5 billion in high-margin sales, he highlighted.
“The stock caught fire today because it’s become impossible to deny the power of that metamorphosis,” Cramer said. “When I say this is a paradigm shift, what I mean is that, within two years, this subscriber base will profoundly define the way we judge the stock of Apple. We’re already well on our way to a world where the key metric is subs, not iPhone sales.”
Initially, most analysts that cover Apple were unsure about the tech giant rebranding itself as a service company, he recalled. The analysts were so focused on the iPhone that they did not care about Apple’s other fast-growing wearable products, he continued.
Over the years, its services revenue kept growing and leadership decided to embrace the segment. In January, Apple preannounced some bad news to get ahead of the curve and revealed that they would stop disclosing the amount of units it sells each quarter, which many saw as a terrible move, Cramer said.
“In the future, it’s gonna be seen as a subscription company with a terrific razor/razorblade business model: the phones are the razor, the services are the blade where they really make their money,” he said. “Before Apple started breaking out its service revenues, the stock tended to sell for about 11-times earnings. Now it sells for 16-times earnings because it’s got a better mix of businesses, both hardware and services.”
The paradigm shift is still unfolding, and investors are still trying to wrap their minds around it, Carmer said.
Watch the full segment here
Traders work at the New York Stock Exchange.
Xinhua News Agency | Getty Images
The major U.S. indices all declined during the session as investors start to worry if the stock market has been too strong for its own good, Cramer said.
“We’ve had a terrific run, so I am blessing you to do some selling tomorrow,” the host said. “But other than that, I think we’re in fine shape. Somewhat overheated, most definitely, but I still think it makes sense to stay the course.”
The Dow Jones had the best four-month rally to start the year it’s seen since 1987. The Nasdaq had its best showing in the same period since its big rally in 1999. No one wants 2019 to look like those two years, Cramer said.
What should your next move be? Read more here
A package of Beyond Meat beef crumbles is displayed for a photograph in Tiskilwa, Illinois, April 23, 2019.
Daniel Acker | Bloomberg | Getty Images
Beyond Meat, the food company behind the meatless Beyond Burger, is set to debut on the public market this week. Carmer said the stock is worth buying — at or below $35 per share.
The plant-based meat maker priced its shares at $25, up from the its original $19 to $21 offering. The stock could surge to $30 once it starts trading, and investors should be cautious if it climbs above $35, he said.
“I think this is exactly the kind of growth story that the stock market tends to adore — in a year that’s already been chock-full of IPOs, Beyond Meat is the fastest grower among them,” Cramer said. “I doubt it will be another Lyft, where the revenue growth was already decelerating by the time the company came public. “
The company reported a net loss of $29.9 million on revenue of $87.9 million for 2018.
Get to know the IPO here
Dan Rosensweig, CEO, Chegg
Scott Mlyn | CNBC
When Chegg CEO Dan Rosensweig first appeared on “Mad Money” in early 2016, the stock was trading at its all-time lows under $4.
Fast forward three years later: the stock has matriculated to Wednesday’s $34.74 close.
“The transformation started on this show,” Rosensweig told Cramer.
Now the textbook and education platform is fueling the public’s everlasting needs to keep learning, according to the chief. More people need to learn, they will need to learn more things more often, and they will have to keep learning for their future and careers, he said.
“We believe in believing in the inevitable,” Rosensweig said. “And the answer is we believe in all of that.”
Catch the full interview here
Cramer’s lighting round: The quarter won’t be good, but buy this stock
In Cramer’s lightning round, the “Mad Money” host zips through his thoughts about callers’ favorite stock picks of the day.
Kohl’s Corp.: “Kohl’s is run by the fabulous [CEO] Michelle Goss, who is doing a great job. Heavily shorted stock, that makes no sense. I know the quarter’s not gonna be that great, but I say [buy].”
Exxon Mobil: “You’re not going to get hurt with a 4% yield buying Exxon at these prices, but it’s no longer my favorite. By the way, I think [CEO] Mike Wirth’s doing a dynamite job at Chevron, although my friend [CNBC’s] David Faber made me feel like: ‘wow, maybe they’re going to come and bid for Anadarko after [Occidental], but I do prefer Chevron to Exxon. “
Delta Air Lines Inc.: “It’s a very cheap stock at 8-times earnings. I’m not gonna tell you to ring the register. I’m gonna tell you that it’s cheap.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Kohl’s, and Anadarko.