Apple Inc. (NASDAQ : AAPL), is trading at a price-to-earnings ratio (P/E), which is unusually high. It is significantly higher than its ten-year-average of 21.
Jim Cramer, a renowned investor, believes that the stock’s high valuation is justified.
Cramer, host of CNBC’s Mad Money argues that Apple is a good investment, even at high multiples, because its revenue model continues to grow.
Apple shares have risen over 30% in the last five months, cementing its position as the most valuable company in the world.
Cramer is bullish despite Apple’s high valuation. This is due to Apple’s ability to innovate consistently and generate consistent revenue streams.
What is Apple’s AI strategy?
Apple’s recent success can be attributed to its strategic push in artificial intelligence (AI).
Apple has partnered up with OpenAI to incorporate ChatGPT in its devices.
Apple has not paid OpenAI for this collaboration in cash.
Instead, OpenAI accepted exposure to Apple’s massive user base of over 1 billion people as sufficient compensation–underscoring the immense influence Apple wields in the tech industry.
Cramer views this partnership as a major victory for Apple, since it allows the company the opportunity to incorporate cutting-edge AI technologies without the heavy financial burden that is often associated with AI investment.
This deal not only strengthens Apple’s product offering, but also strengthens the company’s position in the AI race. Its high valuation is further justified by this deal.
Apple’s “It’s Glowtime”, scheduled for September 9th, has always been met with mixed reviews.
Cramer, on the other hand, sees any weakness in Apple’s stock after an event as a good opportunity to buy.
He acknowledges that although new product launches can be seen as disappointing, Apple’s growth prospects over the long term make it a good investment regardless of short-term sentiment.
Cramer also cites Apple’s consistent financial performance as a reason why investors should remain confident.
He says that Apple’s ability introduce new products and technology, while maintaining a steady revenue stream, makes the stock attractive, even during market fluctuations.
Cramer has confidence Apple’s new CFO
Cramer’s confidence is also boosted by the recent announcement that Apple will be changing its CFO.
Apple plans to replace Luca Maestri by longtime executive Kevan Paraekh.
Cramer believes that this leadership change will be smooth and he sees it as a positive catalyst for the stock.
He believes Parekh will be able to maintain Apple’s financial strategy due to his deep understanding of Apple. This will further strengthen the company’s position in the market. Cramer said,
Apple’s value is a major factor in its high price. Apple’s consistency, and depth of management, is something that other companies would love to have. Apple’s stock has made it easier to sleep at night.
Wall Street analysts echo Cramer’s optimism.
Apple stock’s consensus rating is “overweight” with an average price of $247. This represents a potential 12% increase from its current price.
Analysts continue to see Apple as a growth opportunity, despite its high valuation. This is due to its strong product ecosystem and its integration of AI, as well as its financial consistency.
Apple’s high P/E may raise eyebrows. But Cramer argues the company’s solid fundamentals, stable revenue streams, and strategic investment make it worth the premium.
Apple is one of the most reliable tech stocks in the market. Its consistent financial performance and modest dividend yield of 0.45% make it a very bankable stock.
Apple’s leadership in innovation and its ability to navigate through challenges are what Cramer highlights as making it a good choice for long-term investment.
This post Apple stock soars in value: Jim Cramer explains the reasons why it’s justified could be modified as new developments unfold.
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