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Cramer: No More Magic Apple?

Wednesday, 23 Jan 2013 | 6:08 PM ET
Apple No Longer Ripe For the Picking?
Don't let the Apple story blind you from all the other market opportunities out there, explains Mad Money host Jim Cramer.

If ever there was a stock that confounded investors, it's Apple. With the latest earnings beating estimates but revenue falling slightly short, Jim Cramer reveals what every investor must know.

After the bell on Wednesday, "Apple reported what many considered a disappointing quarter with the company delivering a 33-cent earnings beat off a $13.48 basis, while revenues came in a bit light. As a result, the stock got smashed in after hours trading, down more than 20 points," Cramer explained.

As a result, in the aftermarket Apple traded well below the psychologically important $500 level.

The results and the subsequent price action seem to confirm what Cramer has suspected for quite some time.

"Without Steve Jobs, Apple is just another stock, it's not magical anymore," said Cramer.

"But that's okay," he added. "Just because it isn't magical doesn't mean it's automatically a loser, especially considering how cheap the stock has become after this shellacking."

However that's not to say Cramer thinks Apple stock is a buy – he doesn't. He simply said, "It's time to accept the fact that Apple's a decent stock the way IBM is or Johnson & Johnson is."

No more and no less.

"One thing's for certain," Cramer added. "Neither you nor anyone else wants to hear that Apple is fine, that it's inexpensive even after this quarter. That it has huge flexibility with nearly $40 billion in cash - and that things will work out fine. This stock is way too emotional and even though that's exactly how I feel, the coliseum wants red meat."

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And that blood lust may stem from the almost meteoric rise and subsequent fall that's transpired in a relatively short amount of time. A little over a year ago Apple stock was trading in the high $300's. In September of 2012 it touched $700.

And Cramer sees plenty of reasons why the selling pressure may endure.

- First of all, many people bought it without knowing how the stock market works or how this stock works in particular.

"The market cares about gross margins—how much money is left over after the cost of every dollar of sales—this quarter Apple's gross margin came in at 38.6%." Ironically, the Mad Money host said the results weren't too shabby. But Apple is an emotional stock.

- Second, you have lots of people who bought Apple when it was the undisputed king of smartphones.

"They now have to accept that there is a rival, Samsung, that's good enough so customers don't necessarily have to pay up for the iPhone," Cramer said.

- Third there are people who bought Apple because of the chart.

"It was a stock that kept going higher and outran price targets, so the analysts kept raising numbers. But once the stock started going down, the charts became your enemy, not your friend. And that means the same people who had to raise their price targets on the way up are now cutting them on the way down," Cramer said.

- Fourth, long-term holders have been taking profits.

"After the incredible run, it's only prudent," said Cramer. In 2009, the stock was under $100. "Many sellers have simply been worn down by the price action, which has been hideous."

All told, there are plenty of reasons to sell. But – the stock is relatively cheap and that's a good reason to buy. As a result Cramer added that perhaps the best thing an investor can do is just forget about Apple, all together.

"It's become the equivalent of an eclipse that you can't stop looking at," he said. "Before long your retina's burned out and you can't see anything that's actually worth seeing."


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