Cramer Boosts Apple Shares

Posted by: Ben Steverman on September 16, 2009

Jim Cramer went on CNBC last night, talked for several minutes in front of two apple-filled wheelbarrows, and created $5 billion in wealth for Apple (AAPL) shareholders.

Apple shares were up more than 3% this morning after Cramer touted the stock on his nightly show, Mad Money. This morning’s stock move added $5 billion to Apple’s now $162 billion market value.

Traders are used to the “Cramer Effect,” in which stocks spike after Cramer makes his pronouncements. An evening showing of Mad Money typically attracts less than 260,000 viewers, according to TV by the Numbers, but many traders keep an eye on his recommendations. He’s not necessarily watched for his wisdom as a market pundit, but because of the immediate effect he can have on a stock. (Often, those stocks give up their gains in subsequent days.)

Cramer, a former hedge fund manager, is a complicated figure. His shoot-from-the-hip trading style has been criticized for inspiring reckless investing. In March, he faced off with the Daily Show’s Jon Stewart, who faulted Cramer and CNBC for their coverage prior to the financial crisis.

But Cramer’s last book offered sober, responsible investing advice. “Trying to game short-term movements in stocks [is] almost impossible,” he admitted.

Wednesday’s price move is notable both because of Apple’s large size and the boldness of Cramer’s call: He raised his price target for Apple shares from $200 to $264, a 50% move from yesterday’s closing price.

Cramer’s rationale is offbeat, too. He is not more optimistic about the company’s fundamental prospects. Rather, he says, an “incredibly important accounting change” could allow Apple to recognize all iPhone sales up front, rather than over two years. This change could boost 2011 earnings at Apple by as much as 50%, he says. He used two wheelbarrows filled with apples to explain the effect of the accounting change on earnings.

Cramer admits this will have no effect on Apple’s actual cash flow, or even its long-term earnings potential. But, he insists:

The markets aren’t as efficient as you think. They are oftentimes dumber than we are.

Watch the video here.

I’m not so sure. But Cramer’s call comes at a time when tech stocks are hot. The Nasdaq has outperformed other major indexes by a wide margin this year.

And there are other reasons to be optimistic about Apple. On Sept. 15, Needham analyst Charlie Wolf raised his price target for Apple from $200 to $235, based on improving prospects for the firm’s iPhone driven by the “explosive growth of the iTunes App Store.”

Reader Comments

norman ravitch

September 16, 2009 2:38 PM

I hope that those who lose money taking the advice of schemers like Jim Cramer will not be bailed out by the government. Isn't Cramer perhaps violating the law by recommending, however indirectly, specific stocks?

Karl

September 16, 2009 2:51 PM

Did Cramer see the COLLAPSE of the U.S. economy back in 2007? Did Bernanke see it? Did Greenspan see it? WHY do people continue believing in a few who had NO IDEA that the U.S. economy was collapsing? I'll bet Cramer likes GE stock & Microsoft stock too, correct? I wonder if Cramer like the Detroit Lions to win the Super Bowl this year?

peter

September 16, 2009 3:22 PM

Cramer DID see the collapse on the horizon with his rant of "they know nothing"...and the Treasury secretary even admitted on CNBC that he was right. I do not know Cramer personally...do not subscribe to his service and have not bought his books....but the man is brilliant and does look out for the little guy. I don't live and die by the man's recommendations, but I sure have learned a lot about the game itself.

peter

September 16, 2009 3:22 PM

Cramer DID see the collapse on the horizon with his rant of "they know nothing"...and the Treasury secretary even admitted on CNBC that he was right. I do not know Cramer personally...do not subscribe to his service and have not bought his books....but the man is brilliant and does look out for the little guy. I don't live and die by the man's recommendations, but I sure have learned a lot about the game itself.

peter

September 16, 2009 3:22 PM

Cramer DID see the collapse on the horizon with his rant of "they know nothing"...and the Treasury secretary even admitted on CNBC that he was right. I do not know Cramer personally...do not subscribe to his service and have not bought his books....but the man is brilliant and does look out for the little guy. I don't live and die by the man's recommendations, but I sure have learned a lot about the game itself.

German

September 16, 2009 3:36 PM

@karl- Actually he doesn't like Microsoft stock because it's "old tech stock" instead, he recommends buying new technology market movers.

harold

September 16, 2009 4:10 PM

$264? cramer is delusional.

CrabbyVision

September 16, 2009 4:37 PM

I remember one night, months before the collapse of the economy, stopping my tv channel surfing to see Cramer's sobering warning about the potential failure of banks and other financial institutions if regulators didn't intervene. I found his somber, quiet and cold comments odd, in contrast to his typical rambunctious show persona. At the time, everybody was frolicking in their dreams of buying, flipping houses, etc. Since then, he has gained credibility with me since time proved him right.

Ted Nolan

September 16, 2009 5:08 PM

Karl. Not to give cramer too much credit, but his rant certainly did give a good bit of warning of what was coming. The size of the problem certainly caught almost everyone by surprise, and while we can chop cramer up often, you've got to tip your hat to him on this one. His hysteria was very notable, and it sure did make a point.

Constable Odo

September 16, 2009 5:24 PM

Steve Jobs should be paying Cramer to shill for Apple full-time. It doesn't matter how many iPhones are sold, reserve cash is in the bank or whether the retail stores are packed. Apple fundamentals don't mean a damn thing to investors. Just hire a couple of loudmouth shills to boost up your share price.

Apple had been recently serially upgraded by firms and analysts and it didn't do squat. All it took was Jim Cramer's fevered, pitchman blathering to get the stock moving upward. Cramer better not downgrade it next week or all gains will be lost.

PractialEcon

September 16, 2009 7:42 PM

Kudlow is my favorite ninny. I still have deep memories of him yelling back in 2006, "the housing market is not frothy!" "there is no impending bubble".

kevin

September 16, 2009 8:24 PM

If you really take the time to follow the substance of what Kramer's counsel and behave like he suggests you should make money. I lost less in the crash than most 30% and I am up 35% ytd with plenty of cash tucked away when it all goes bad again and it will. Like everything in life you have to do your own homework and make your own calls.

Grawl!x

September 16, 2009 9:49 PM

As an AAPL shareholder, the last thing I want is Cramer's lemming followers jumping into the stock. There will once again be a bunch of people second-guessing everything Apple does in the unreasonable expectation of doubling their money overnight. How many of these new shareholders have any clue, at all, what drives Apple's business?

Jim Cramer = Manipulation. I'm tipping he bought up big before last night's show, and now he's selling into the temporary bubble he created.

Johnny

September 16, 2009 10:11 PM

It's tough trying to say something intelligent and profound every single day. He's correct that the herd of investors collectively are dumb. Just look at the stock reaction. I am very dubious and suspicious of Cramer and Warren Buffett coming out with ultra bullish comments on triple-witching expiration week though.

Sarah Parker

September 21, 2009 4:09 PM

Isn't this something especially before ad week. Ad week is starting and it is what we have all been waiting for. I’m happy I’m able to hear it streaming live from my BlackBerry. I could hear it where ever I go on a loink on advertising week website. There’s also a widget that I could include on my Facebook page. I won’t miss anything now.

Interesting

September 25, 2009 3:11 AM

All that may be fine and dandy. But has anyone looked at their cash flow recently? They made 7 Billion this year, while at the same time lost 13 Billion in investments? Coupled w the fact they haven't paid a dividend out in 14 years, one has to wonder how long they can sustain management like that.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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