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Apple vs. Amazon: Cramer's Tale of Two Techs

Why is Apple tanking at nine times earnings when Amazon at 68 times earnings is marching higher?

How does that make sense?

And, last week Apple reported earnings that edged past Wall Street's estimates yet the stock was pounded, falling some 64 points, or 12 percent in a single day.

This week, Amazon reported a flat out miss. The company earned 21 cents when analysts were looking for 27 cents; the Street was expecting Amazon to bring in $22.6 billion in revenues, they felt short of that number by more than 1.3 billion.

Yet Amazon shot up on the release — roughly 10 percent in the aftermarket.

That doesn't seem right, does it? Cramer explains.

First, Amazon has sparkle. Apple doesn't, anymore.

"Amazon is viewed as a turbocharged growth stock. It's taking share, and investing huge sums of money to build out its business in order to become the premier global e-commerce and fulfillment company. And when you have that kind of growth trajectory, the market will reward you," Cramer said.

By contrast Apple is viewed with a critical eye, with investors growing worried that the magic has started to fade after the death of Steve Jobs.

"Apple used to be viewed as a growth stock, just like Amazon—hence the long run up to $700. But now it has lost the patina of growth and it's being treated like any other stock, which means people are a lot more skeptical. They're asking questions and they're demanding answers," Cramer explained.


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Also, the companies face very competitive landscapes.

"Amazon has virtually no competitors, which means when they want to, they can start showing all the earnings they want. They just have to stop spending to invest in new business," said Cramer.

By contrast a number of smartphone makers, such as Samsung and Nokia, are developing products that threaten to eat into the iPhone market share.

As a result the market fears that the growing competition will eat into Apple's profits. "The sell-off reflects skepticism that Apple can't maintain the huge gross margins it has," Cramer added.

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In addition, the sky's the limit for Amazon's future potential but Apple is facing a real ceiling.

"Amazon's total addressable market may be literally all of retail. By comparison, Apple's total addressable market may be no larger than the personal computer and cellphone replacement segment, and many think that in a few years those markets will be saturated."

When taken all together, it seems reasonable to conclude that the Street will continue to reward Amazon and give Apple a hard time. Therefore, Apple may continue to languish with only a 9 multiple while Amazon can continue higher with a 68 multiple.

Still Confused? Cramer said the dichotomy may be best understood with a metaphor.

"Apple is like a realist painter, like Manet or Winslow Homer. It has to be bound by the four walls of the canvas. It's trapped in an unfair world of realism. Amazon is an abstract artist—it's a Rothko—and its share price reflects the new perspective it brings to, well everything."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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