Facebook has perhaps the best business model of all time, Jim Cramer said.
"When you have an amazing product that is beloved and in demand worldwide and it costs very little to produce and has no serious competition. That's Facebook," the "Mad Money" host said.
Thus, Cramer was shocked when investors sold the stock of Facebook on Thursday. He considers the social network to be a very rare company with incredible prospects, with a fairly low stock valuation compared to most other stocks.
"There aren't many of those and as it goes down over the next couple of days, which has been the pattern, I think you would be nuts to pass it up," Cramer said.
What makes Facebook unique is that the users cover the cost of the quality content. Typically, content can cost a significant amount of money to develop. In this case, Facebook simply distributes it and makes money from it.
In fact, the more content the users create, the more the advertisers want it. The biggest issue Facebook faces, according to Cramer, is if they have enough salespeople to handle the business.
In its fourth quarter, Facebook had advertising revenue of $8.63 billion, up 53 percent from what Wall Street predicted. It also had 64 percent increase in gross margins, meaning, how much it made after the cost of goods sold.
Advertises love it because of the engagement, with 1.23 billion daily active users—including 400 million daily active users on its photo sharing service, Instagram.
Based on Facebook's earnings of $1.41 per share versus the $1.31 that Wall Street was looking for, Cramer extrapolated that the company could earn $6 this year, and possibly $7 in 2018. With revenue growing at 53 percent, and the stock selling at just 19 times next year's earnings, even with a low price to earnings multiple of just half its growth rate means the stock would be worth $175.
The stock closed at $130 on Thursday.
Cramer suspects that investors refuse to pay up for it because they don't think the business model is sustainable based on ad spending. They also worry that Facebook raised its forecast on how much it will spend, and that the company is "some hippy-dippy outfit run by dreamers."
Apple was once viewed as a one-product company, and therefore assumed to be worth less than what it sells for now. It turns out there was a lot more revenue away from the device, and Cramer expects the same from Facebook.
Cramer also wasn't worried about Facebook's spending, because it's simply spending to meet demand, which is a high-quality problem. Additionally, Facebook management is always the smartest in the room. They know where the company is headed, and they are ready to execute.
"So, feel free to sell one of the cheapest stocks in the market, as so many people did today. Go dump one of the greatest stories of all time. I don't give a darn," Cramer said.
Cramer's charitable trust owns the stock, and it has no intention of selling any time soon.