Sometimes the best investments are also the most underestimated ones. Just look at Google, Cramer said Friday.
Wall Street got a big surprise when the Internet search giant reported blockbuster earnings after the bell Thursday. Analysts had been bearish on Google ever since it last reported in April. They were concerned the company was spending too much, and were worried about the leadership of Larry Page, Google’s co-founder and new CEO. There was also chatter about Google being late to the social media game and the fact that tech was tanking.
Cramer, however, was not one of those concerned. In fact, he recommended getting in on this name six weeks ago because he thought it looked way too cheap in light of all the hoopla over the initial public offering of Yandex , the so-called Google of Russia.
So, now that Google has blown the Street away with its earnings and its shares have surged, is it too late to get in the game?
Cramer certainly doesn’t think so. In fact, he thinks Google could hit $740 a share.
The "Mad Money" host said that even though the company spent more money by raising salaries and hiring new employees, it still managed to grow profits by 24 percent. Plus, it delivered 36 percent revenue growth.
“We love accelerating revenue growth because it means business is getting stronger, and ultimately it leads to greater earnings power down the road,” he said.
What’s more, Cramer said, is that Google is still the “unrivaled sultan” of paid search. It also is doing well with its Android smartphones and Google+, its social networking offering, has accumulated 10 million subscribers since it was rolled out a couple weeks ago.
Cramer said despite Friday’s great run, Google is still inexpensive and will work its way much higher into next quarter's report.
“When you back out the company’s enormous cash hoard — $110 in cash on the balance sheet — then Google is selling for just 12 times next year’s earnings estimates,” Cramer said. “If you assume that Google can trade at 15 times earnings — pretty conservative given the 17.8 percent growth rate — then the stock could easily hit $740 a share, my new price target for this tech dominator.”
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