CNBC’s Jim Cramer on Wednesday laid out a group of big-name stocks that are worth buying at current levels, even as investors contemplate whether the overall market is reaching a top.
The major indexes were practically flat in Wednesday trading but remain near their highs. He laid out a case for owning Apple ahead of its quarterly report, Netflix and IBM, the latter two having reported quarterly a day prior.
“They explain how you can justify believing in a couple of high-profile stocks and how it’s not all that much of a leap of faith when you consider the pros as well as the cons,” the “Mad Money” host said. That’s what “makes me a believer. It’s why I don’t want to leave this market … even as I’d often like to try.”
Apple
Apple shares have more than doubled to almost $318 since trading at $153 a year ago. Cramer sees more positive trajectory in the stock on the back of its iPhone 11 and wearable devices. He is betting that the company can surprise Wall Street when it reports earnings next week. Analysts estimate roughly $88.4 billion in sales for the quarter.
“We just got word that Apple’s raised its semiconductor orders for the new phone, and the accessory business is on fire because of the love for the AirPod Pro, which I can personally attest are extraordinary,” he said. “In other words, after spending a long time in the humdrum wilderness, Apple might finally be a growth stock again.”
Netflix
Just last year, Cramer was uncertain about how Netflix would match up against increasing competition in the streaming space as Disney rolled out Disney Plus. The host even talked about kicking the name out of the fabled ‘FAANG’ group of tech stocks.
Cramer’s sentiments have changed, especially in the wake of Netflix’s earnings call Tuesday when he heard more about CEO Reed Hastings’ focus on artificial intelligence to defend its place in the market. The host called AI Netflix’s “secret sauce” over rivals and found solace in its global growth, despite it having subscriber challenges in the domestic market.
“Netflix knows what you want before you want it,” he said. “Many companies claim they have AI ability. Netflix changes your life, or at least your viewing patterns.”
The stock fell nearly 4% Wednesday, on soft guidance in its quarterly report, and is virtually unchanged from a year ago. Cramer said Netflix shares are “overvalued” when considering its earnings prospects, but he thinks global growth justifies its $143 billion market capitalization.
IBM
IBM ended a quarterly streak of year-over-year declines and topped estimates when it reported fourth-quarter earnings Tuesday. Cramer applauded the company’s cash flow numbers, mainframe business and contribution from Red Hat, the open-source software business it acquired last year.
With the stock trading at roughly “10 times earnings [with a] 4.5% yield, I think IBM represents a decent investment for as long as that mainframe cycle keeps working,” he said. “Sure, IBM still has several faltering divisions. … Eventually, the company will have trouble meeting estimates, next year perhaps, when the mainframe cycle peters out, although it shows no signs of slowing now. It’s getting aggressive, it’s getting better. I like it here.”