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Candy fix could drive profits: Cramer

(Click for video linked to a searchable transcript of this Mad Money segment)

After years of struggling with your sweet tooth, finally, it's led to gains where you want them; in your portfolio!

That is, the "Mad Money host thinks shares of the company behind the game Candy Crush could satisfy your taste for gains. Therefore as King Digital, the game's developer, comes public on March 25th, Cramer thinks you should grab a piece of the IPO.

Because Candy Crush has become an extremely popular game that millions of people play every month on their smartphones or on Facebook, Cramer thinks the opportunity presented by the IPO may be significant.

"King's expected to price somewhere between $21 and $24 a share," Cramer said, "and as long as it doesn't price too far above the top of the expected range, at $24, then I think you should try to get in on the deal."

Candy Crush saga game on iPhone
Simon Dawson | Bloomberg | Getty Images
Candy Crush saga game on iPhone

That may seem counterintuitive to investors who bought shares of Zynga on the IPO. After all, the thesis was quite similar. When Zynga came public at the end of 2011 it was the maker of the popular game, Farmville. "However, if you got in on the IPO and have been holding Zynga for all this time, then you're sitting on a nasty 45% loss," Cramer said.

So why King Digital when Zynga was so painful?

Cramer says the IPOs are not similar in ways that matter on Wall Street.

For example, "As of the fourth quarter, King's Candy Crush had 12.2 million unique players every month. In the quarter before Zynga came public, Farmville had just 3.4 million," Cramer said.

"Also, when Zynga came public, it priced at 5 times sales—King is looking to price somewhere around 3.7 times sales. It's just much cheaper."

On top of that, "Mobile devices account for 70% of King's revenue. Last year, not even before it came public, but last year, Zynga only got 24% of its revenues from mobile," Cramer added.

"And Zynga has had to acquire other game developers in order to grow while King develops in-house. They've only ever made one acquisition."

In other words, there are more compelling reasons for King to command a higher premium as compared to Zynga. Ironically, if the IPO prices around the mid-point of its range, King's premium will be significantly less.

"When Zynga came public it priced at 58 times earnings," Cramer explained. "At the midpoint of King's $21-$24 IPO price range, King would be trading for just 13 times earnings."

Again 13 times earnings.

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"Not only is that far less than Zynga, it's less than the average stock in the S&P 500!" Cramer said.

The Mad Money host thinks that's just too cheap.

"King has a terrific balance sheet, with $517 million in cash and no debt as of the end of last year," Cramer added. "I think the market is gun shy from Zynga and as a result King is being valued to cheaply. Again, as long as it doesn't price too far above the top of the expected range, at $24, then I think you should try to get in on the deal.

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