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Apple Steals $192B in Market Cap From Rivals

Thursday, 17 Jun 2010 | 6:39 PM ET

With Apple’s market cap now at $247 billion, making it the second largest American company behind only Exxon Mobil, we’re starting to hear the inevitable talk of “overvaluation.”

Apple vs. the World
Cramer cuts into the core of Apple to see how high it could go.

Is Apple really worth so much money? Or is that valuation out of whack with reality?

Cramer thinks the company is in fact worth even more than that. And he came up with his own proprietary way of valuing this stock – by looking at the amount of money Apple has cost its competitors.

“We think of Apple as a value creator, as this company has made lots and lots and lots of money for its shareholders,” Cramer said. “Yet it’s also the ultimate destroyer of wealth for everything in its wake.”

Using just the iPad and iPhone, Cramer estimates that Apple has captured $192 billion in market capitalization from its competitors. Think about it:

The iPad doesn’t support Adobe’s popular Flash program for viewing Web video. The tablet is eating into Amazon.com’s Kindle e-reader. And Dell and Hewlett-Packard’s coming tablet will face stiff competition from the iPad, and Microsoft shelved its own once Apple’s hit the market. In total, Cramer thinks Apple’s stolen as much as $56 billion in market cap from this group.

The iPhone meanwhile has hurt makers of both smartphones and “dumb” phones. Apple’s handset, which continues to grow at an annual rate of between 70% and 100% a year, has cut into business for Research in Motion , Palm and Google , costing them $40 billion in market cap. And Nokia and Motorola – the latter could lose another 50% of its legacy cell-phone business by the fourth quarter – have given up $96 billion in market cap.

There’s your $195 billion, and that’s without even taking into account the damage done to the music industry, record stores and Microsoft Zunes of the world by the iPod. But since the iPhone’s release, Apple’s market cap has rise by just $129 billion. Cramer said that value “belongs rightfully to Apple.”

Given this valuation, Apple at $272 is still a “resounding buy,” as Cramer thinks the stock is headed to $300 “easily.” But those investors who think the price is too high can try “deep-in-the-money” calls, he said, to control more stock and limit their downside. Read the chapter on options in Cramer’s Getting Back to Even for more on that.

When this story published, Cramer’s charitable trust owned Apple.

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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