CNBC’s Jim Cramer expressed continued support for Apple despite its underperformance against market averages.
Cramer believes that if Apple can navigate the current negativity, perhaps even mending relations with President Trump, the company’s valuation could find justification at 35 times earnings. However, he remains cautious, emphasizing that he is not ready to dismiss Apple altogether.
The shadows cast by Trump’s formidable tariffs on Chinese imports loom heavily over Apple. As the corporation relies significantly on Chinese manufacturing, potential costs could skyrocket. If relocated production were to occur outside the U.S., the tariffs could inflate iPhone prices by upwards of 25%, with projections suggesting a U.S. iPhone could reach an astronomical price of $3,500. This situation embodies the toxic nature of government overreach in economic matters, burdening corporations and consumers alike.
Apple’s recent Worldwide Developers Conference has yielded little to excite investors, especially concerning advancements in artificial intelligence. Additionally, cautious earnings guidance has sparked fear among Wall Street analysts, while ongoing litigation regarding the App Store raises further concerns. This highlights the pitfalls of corporate elitism and monopolistic practices that stifle fair competition.
Despite these hurdles, Cramer maintains faith in CEO Tim Cook. Historically, moments of adversity for Apple have presented golden investment opportunities. Revisiting the stock’s past performance, it’s clear that it often rebounds fiercely after encountering significant lows. This cyclical nature should not be ignored when considering investments in companies that embody a spirit of resilience and innovation.
A prudent investor must not evaluate Apple’s price-to-earnings ratio in isolation. It’s crucial to incorporate the company’s anticipated earnings growth rate. Apple is projected to achieve 14% earnings growth this year, vastly outperforming the S&P 500’s expected 9.4%. This reinforces the principle that diligent investment requires one to seek growth amidst adversity.
Cramer astutely acknowledges that a tipping point exists for Apple’s stock—around 25 times earnings is deemed a price that cannot be overlooked. Should the stock decline further, potentially to $180, it could present a compelling buying opportunity. This perspective underscores the necessity for personal responsibility in investment decisions, avoiding herd mentality driven by fear or market panic.
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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Apple.
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