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Cramer applauds Apple's emerging razor-razorblade model: This could be 'huge'

Key Points
  • "Mad Money" host Jim Cramer doubles down on his praise of Apple after the company's second-quarter earnings report.
  • Cramer says that Apple's growing service stream could be a major advantage for the iPhone maker going forward.
Apple's razor-razorblade model could be huge

Apple's service stream revenue has never been quite as important as it became in the second quarter of 2018, CNBC's Jim Cramer argued on Wednesday.

"[It] simply didn't have enough critical mass to make a difference until, well, now," the "Mad Money" host said one day after Apple's earnings report. "With last night's blowout quarter, which had huge China sales and fabulously better than expected numbers for even the much derided iPhone X, that narrative is now gone."

"The key takeaway was that the service business has finally arrived," Cramer said.

Apple grew its subscriber count to 270 million people in the second quarter, up by 100 million year over year. Its services revenue was more than $9 billion.

Cramer noted that the new total overshot Amazon Prime's subscriber total by 170 million; HBO's count by 130 million; and Netflix's numbers by more than double.

"Suddenly, Apple's thinking of itself in terms of a brand new word: members," Cramer said.

In a world where brand loyalty is increasingly hard to come by, especially for consumer-facing companies like Procter & Gamble or Coca-Cola, Apple's burgeoning razor-razorblade model has power, he said.

"We've found one consumer products brand that has staying power, the Apple brand, with 99 percent satisfaction," the "Mad Money" host said.

Cramer has long argued that Apple's stock shouldn't be covered solely by tech analysts because it is, at its core, a consumer products manufacturer.

But Apple's emerging membership base means Wall Street needs to think even bigger, he said.

"Think about it: this is a revenue stream that grows even if they don't release a new iPhone," Cramer said. "Heaven forbid they actually create one that finally gets these tech analysts excited."

He argued that this "critical mass" gives Apple something that most membership-based streaming services can only hope for: a way to sell into their own, self-made channels.

And Cramer saw a lot more runway for the iPhone maker. He highlighted the possibilities in health care: Apple could charge consumers $15 a month to store all of their health information, including prescriptions, insurance cards and medical history, in their iPhones' Health apps.

"That would be huge. Now let's hope [CEO] Tim Cook has thought about it because then 2019 will be a gigantic year, and the margins? With this kind of service business, 90 percent margins is within the realm of possibility," Cramer said.

"Yes, it's that good. It's a razorblade, but much better than a razorblade will ever be."

Read Cramer and Josh Lipton's full Tuesday interview with Apple CEO Tim Cook here.

WATCH: Cramer on the new Apple

Cramer applauds Apple's emerging razor-razorblade model: This could be 'huge'

Disclosure: Cramer's charitable trust owns shares of Apple and Amazon.

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