Despite seeming value, Cramer says ‘sell’

Sometimes a stock looks like a value play when it's actually a value trap.

Jim Cramer thinks that's the likely case for Western Union, a stock some pros cite as a buy due to the company's push into digital as well as its dividend yield of about 3 percent.

Among the more storied companies across American history, Western Union dominated the telegraph industry in the late 19th century. In more recent times, however, business has been focused on the transfer of funds with the company collecting fees based on the type of transfer.

Jim Cramer Mad Money
CNBC

Cramer doesn't like the business. He says over the past several years the company has been assaulted by new players, which, in turn, has dragged down profits.

"Now, the bulls expect negative pressures to subside over the next couple of years, but I think they're wrong. In my view, Western Union is facing some serious structural issues that won't be going away any time soon. That's why I think the stock is a value trap, even down here trading at 12 times next year's earnings estimates, and should be sold," Cramer said.

The "Mad Money host is equally bearish on rival Moneygram and largely for the same reasons. He says, again, the industry is changing rapidly, and it, too, is getting crushed.

In some cases, a company that's more nimble is winning business; in other cases, big box stores are grabbing a piece of the action.

"Earlier this year Wal-Mart rolled out their own, much cheaper, money-transfer platform that lets people send cash to and from more than 4,000 Wal-Mart locations. That's brutal, just one more vicious competitor," Cramer said.

Meanwhile, brand new players such as Xoom have surfaced. As an online consumer-to-consumer money transfer service that focuses primarily on remittances to India, the Philippines, and Mexico. "Xoom has a lot of runway for growth here in the United States," Cramer added.

Finally, there's new technology such as Apple Pay, which may not compete directly with Western Union or Moneygram, but it still threatens to change the way in which funds are transferred.

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All told, given the surge in competition and the revolution underway in the industry, Cramer says consumers may win, but shareholders stand to lose.

"In the business world, there is absolutely nothing worse than competition. Right now the money transfer space is rife with all kinds of new competitors. That's terrible for the incumbent players like Western Union and Moneygram, which are both sells in my book. In fact, this business is so competitive that even a dynamic new digital entrant like Xoom is too risky to own here."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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