J. Crew Group is up a whopping 397% since Cramer’s Dec. 1, 2008, recommendation. But that doesn’t mean investors have missed the move, he said during Tuesday’s Mad Money.
One of Cramer’s favorite technical analysts has predicted that J. Crew , trading now at about $44, could reach $50. But the charts also seem to indicate that there may be a longer-term pullback in JCG’s future. So while investors could buy the stock here based on that eventual $50 price target, Cramer said, it probably makes more sense to wait for a pullback.
What about the fundamentals? The driving force behind J. Crew’s success is CEO Mickey Drexler, Cramer said. He’s bringing to this company the same deadly combination of both business and fashion success that he delivered at Gap. They no doubt played a key part in JCG’s recent earnings beat, same-store sales increase and reduced inventory going into the holidays. This latter point will eliminate the need for J. Crew to discount merchandise in order to empty its shelves, which would have hurt the margins.
Just as he developed successful spin-offs Old Navy and Banana Republic for Gap, Drexler has helped to incubate J. Crew’s “crewcuts” for kids and “Madewell” for women. These products have been very well received, to say the least: First Lady Michelle Obama wore J. Crew during her Tonight Show appearance, and Obama kids Sasha and Malia wore “crewcuts” apparel on Inauguration Day.
It’s these intangibles, specifically what Cramer called “the Mickey Drexler quotient,” that make the stock so valuable, even though they can make JCG hard to value. Cramer agreed with the previously mentioned technical analyst, though, saying J. Crew is a buy, but probably a better one at lower levels.
His recommendation? Start half a position in JCG now and then add the rest when the stock pulls back.
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