Jim Cramer Says “Apple Stock Deserves a Premium”

Apple Inc. (NASDAQ:AAPL) is one of the 21 stocks on Jim Cramer’s radar. Cramer showed optimism toward the stock as he believes that the company’s CEO and the team deserve the “benefit of the doubt.” He commented:

“We’ve had an incredible run over the past few months, but somehow it doesn’t feel complete with Apple lagging far behind the averages… As I’ve said before, I’m inclined to stick with Apple despite all the uncertainty. Tim Cook and his team have earned the benefit of the doubt. I’ve been around long enough to remember all the times when things have looked very bad for Apple, and in hindsight, they’ve all proven to be great buying opportunities, all of them.

… So Apple stock deserves a premium, and that’s what it’s getting. It trades at 28 times earnings while the S&P now sells for 23 times earnings. But how much of a premium does Apple deserve?… The S&P 500 has a PEG ratio of just under 2.5 right now. Apple’s PEG ratio is just under 2. So you could argue that Apple’s already undervalued here…  So let’s put this all together now. When we look at the past couple of years of Apple’s price to earnings ratio, its, the multiple has repeatedly bottomed at 25 times earnings.

When we briefly breached that level after Liberation Day, the stock quickly bounced back, even though the headlines read terribly at the time. If Apple were to revisit that level, meaning if the stock falls below $180, then I think you have to buy it. But if the company can shake off the negativity that currently surrounds the story, I’d argue that the stock deserves to trade at something more than 35 times earnings… roughly where it peaked last year.

Bottom line though: There’s clearly a point where Apple’s stock becomes too cheap to ignore, and recent history says that’s around 25 times earnings. Now write this down, that means down about 20 points from here. I certainly don’t want to see it revisit that level… That’s the level. But if for some reason the stock gets clobbered, you know what? Let’s back up the truck at $180. But if Apple can shake off its current shroud of negativity, they make nice with President Trump somehow, I could justify paying 35 times earnings for the stock, which is why I’m simply not ready to give up on this one. $180, that’s the level.”

A wide view of an Apple store, showing the range of products the company offers.

Apple Inc. (NASDAQ:AAPL) designs and sells devices like iPhones, Macs, iPads, and accessories. The company also provides cloud services, digital content, and subscription-based platforms such as Apple Music, Apple TV+, and Apple Pay.

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