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Tech’s Comeback Kids?

The market couldn’t be more wrong about NVIDIA and Jabil Circuit, Cramer told viewers on Tuesday. The stocks are down horribly for the first half of the year – 40% and 15%, respectively – despite an incredibly strong performance from the companies themselves.

But “I think both of these stocks can makes comebacks,” he said.

The Mad Money host’s focus on NVIDIA and Jabil was part of his weeklong series on the “Biggest Losers,” a homage to that popular NBC show. Cramer’s highlighting some of the worst-performing stocks in the worst-performing sectors – in this case, information technology, down 6.6% year-to-date – with the idea that a few select names are poised for a sizable rebound. Here’s his case for NVDA and JBL.

NVIDIA, a graphics chipmaker that virtually shares its industry with AMD , boasts a number of new products for gaming PCs, notebooks, netbooks tablets and smartphones that should drive sales in the second half of 2010. New visual computing software, like Adobe’s Creative Suite 5, require NVIDIA’s high-end semiconductors, also giving a boost to revenues. The company’s ION chips for notebook computers are in 70 laptop designs, 50 of which are scheduled to start production in the next six months. And NVIDIA’s chip for smartphones and tablets should be in a whole slew of products that are also going into production during the last part of the year.

For these reasons, NVDA should be ramping ahead of these products launches, not sinking like some also-ran dot-bomb loser. That’s why Cramer thinks the stock “has the potential to come back, I think, as one of the biggest gainers in the second half.”

Jabil, on the other hand, which assembles all things tech, reported a better-than-expected quarter back on June 22, delivering in virtually every division: computing, storage, industrial and digital home and office up 13% to 14%; telecom up 9%; networking up 20%; and mobility, where the company makes parts for cellular phones, was up 23%. Plus, management predicted that revenues from its consumer business overall would be up 25% in the next quarter. But still the stock has added only about $1 to its share price since before the quarter.

Cramer blamed the poor performance on Europe. As much as 31% of Jabil’s production ends up on the Continent, and that has been enough to send investors running. But according to the company, there’s been no slowdown in business there. So that collective freak-out was all for naught. And as Europe comes back, Cramer said, it should take JBL with it.

Right now, if you back out the $3 of cash per share, NVDA at $10.92 trades at just eight times 2011 earnings even though it has a 12.4% long-term growth rate. Jabil fetches just a seven multiple with a 12% growth rate. And again, that’s in spite the host of positives these companies have in front of them for the rest of the year.

So what is Cramer’s take on this?

NVDA and JBL have become “way too cheap,” he said. “Given that both companies should do a whole lot better in the second half, I’m betting their stocks will follow suit and be some of the biggest gainers, which is why I am telling you to buy NVIDIA and Jabil Circuit.”

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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Price
 
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ADBE
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AMD
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JBL
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NVDA
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