Mad Money

Jim Cramer reacts to Apple car rumors: 'The upside could be enormous'

Key Points
  • "An electric vehicle merely gives you one more reason to own Apple, not trade it," CNBC's Jim Cramer said.
  • "Hopefully, everyone will forget this story tomorrow and the stock will sell off, giving you another chance to buy into weakness," the "Mad Money" host said.
  • "We know Apple likes to disrupt big end markets [and] it doesn't get any bigger than the auto industry," he said.

In this article

VIDEO4:5704:57
Jim Cramer reviews 'dream market' of start-ups targeting the alternative fuel food chain

CNBC's Jim Cramer on Tuesday reacted to rumors that Apple could be laying day a path to get into the car business, saying Apple stock should be owned simply for its existing catalog of technology products.

"An electric vehicle merely gives you one more reason to own Apple, not trade it," the "Mad Money" host said. "Hopefully, everyone will forget this story tomorrow and the stock will sell off, giving you another chance to buy into weakness."

On Monday, Reuters published an article reporting that the iPhone manufacturer could build a car, potentially with its own battery technology, by 2024. Investors responded the day after trading the stock up almost 3% to a $131.88 close, giving it a more than $2.25 trillion market cap, the largest valuation on the market.

The comments came after a mixed day of trading on Wall Street with the Dow Jones index dropping about 200 points, or 0.7%, to 30,015.51. The S&P 500 fell for the third day in a row, slipping 0.2% to a 3,687.26 close. The tech-heavy Nasdaq Composite climbed 0.5% to a record 12,807.92 close.

While the company has yet to comment on the speculation, Cramer highlighted that the company committed $18 billion on research and development, saying that an electric vehicle could be on the company's wish list.

"We know Apple likes to disrupt big end markets [and] it doesn't get any bigger than the auto industry," Cramer said. "If there's anyone who can give Tesla a run for the money, it's Tim Cook and his team at Apple."

In an alternative world, Tesla just may have combined forces with Apple, according to the head of the electric car manufacturer. CEO Eon Musk late Tuesday said in a tweet that he reached out to Apple CEO Tim Cook during the "darkest days of the Model 3 program" with the intention to sell the company "for 1/10 of our current value." He said Cook declined the meeting. Now valued at nearly $597 billion, Tesla could have sold for $59.7 billion, based on Musk's statement.

Cramer advised investors against valuing Apple like the high-flying stock of Tesla, which sports a 665% gain this year. Tesla shares fell 1.5% on Tuesday, ending the session at $640.34.

Cramer likened Apple to a consumer packaged goods company, suggesting that investors judge the company on the lifetime value of its customer base. Apple, which is relying more on its growing subscription business and the App Store, should be judged more like a Colgate or Procter & Gamble, he added.

"Imagine if there was a catalyst beyond the subscription revenue stream," Cramer said. "If Apple's really working on an electric car … the upside could be enormous."

VIDEO12:1012:10
Jim Cramer reacts to Apple car rumors: 'The upside could be enormous'

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

Disclaimer

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com