What Really Drives Apple’s Earnings

Apple has “historically sandbagged” analysts with its quarterly earnings reports, Cramer said during Monday’s “Stop Trading!.” The company has rarely given Wall Street the numbers it needs to properly revise estimates either up or down for the coming year’s business. So what should investors expect when Apple reports after the closing bell?

That might not matter. Not if you approach the company’s earnings estimates the way Cramer does. He now thinks of Apple as a worldwide retailer, one who’s less expensive items, like the iPod and iPad, are drawing customers to higher-ticket products like the Mac and MacBook. The more merchandise to leave the store, the higher Apple’s dollars per square foot earned. It’s that metric, Cramer said, that “is really what’s driving the numbers.”

Add in the potential for Apple to capture the enterprise market, especially with its iPad tablet, and that’s how Cramer arrived at his $22-a-share estimate for fiscal 2011.

“Which would then make it so you have to raise numbers and you have to raise your target,” he said.

Citigroup may finally trade to its book value, which Cramer put at $4.65-$4.70. This is an international bank that is now less exposed to mortgages and foreclosures, and the government seems to be done with the heavy selling of its stake in Citi, which was weighing on the share price.

“So suddenly you have kind of an investable story, and that’s different,” Cramer said. “This has always been a spec story, now it seems investable.”

In the fast-food space, Cramer said he likes Jack in the Box . The company, which has a big presence in California, may ride that state’s recovery, and he thinks JACK’s Qdoba Mexican-food chain could rival Chipotle . Plus, a lot of these stocks, including Wendy's/Arby's Group, recently have been doing well.

“This cohort is getting some real love,” Cramer said.

When this story published, Cramer’s charitable trust owned Apple.

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