A company with $60 billion in revenues but still has only a $200 billion market cap is cheap, Cramer said. Plus, Google has room to grow because the internet search/ad giant holds only a fifth of the potential market share Cramer expects.
Investors need to let go of the dot-com-era hangover. Ever since that time, high-priced stocks have seemed illegitimate and unsustainable. But Google is a real company with real earnings that can be valued just like any other stock, Cramer said.
Cramer estimates that Google will earn $20 a share. The company is a consistent 30% a year grower, he said, which puts its multiple at about 37 times earnings. That’s how he came up with his $750 target.
But a look at other growth companies at least somewhat close to Google shows that $750 could go much higher. Hologic grows at 29% a year and gets a 44 multiple. Google would be worth $880 with that number. Intuitive Surgical grows at 40% and gets a 100 multiple. If that’s cut by a quarter to equal Google’s growth rate, the cost for one share of GOOG is still $1,500.
“My price target is $750,” Cramer said, “but I have to believe that GOOG is going much higher, even if I can’t say so.”
Jim’s charitable trust owns Hologic.
Questions for Cramer? madmoney@cnbc.com
Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com