Cramer on Apple earnings and why he feels the stock is undervalued

CNBC’s Jim Cramer said Thursday he still believes Apple’s stock is undervalued, even with a nearly 60% run higher in 2019, almost triple the pace of the overall stock market this year.

“This is a company that has a multiple that’s way too low given the fact that it’s consistent and China does not seem to be the be-all and end-all of what’s going to happen,” Cramer said on “Squawk on the Street.”

The “Mad Money” host was suggesting that any adverse effects from increased competition in China and the U.S.-China trade war itself should not be keeping a lid on the stock.

Apple trades for just a 19 price-earnings ratio based on estimated 12-month earnings, lower than the P-E on the S&P 500 of more than 22 times. The S&P 500, which closed at a record high Wednesday, was up 20% this year.

“China’s not as great as you’d like but does it really matter? This is not a phone story,” argued Cramer. “Phones are only a piece of the puzzle now,” he added, pointing to Apple’s growth around its services as well as its wearable devices like the Apple Watch and wireless AirPods earphones.

“If we’re just going to be bound by the four walls of the number of phones that are sold, we’re going to miss the fact that this thing might get a 22, 23 multiple,” Cramer said.

On Wednesday evening, Loup Ventures co-founder Gene Munster made a similar argument. Munster, a tech Wall Street analyst for years before starting Loup, said Apple growth’s around services and wearables should be fetching a higher multiple on the stock of around 25, “which should yield a $350 stock.”

Apple beat market expectations in its quarterly results, released after the bell Wednesday. The stock was up more than 2% on Thursday afternoon to around $248.

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