Segment 1: A New Target for Apple (AAPL)
Cramer said that he has revised his price target for AAPL to $264 because he thinks that their earnings estimates are too low. There is an accounting change that will make AAPL’s earnings to go to $12 per share from $8, which will make it look cheap. He thinks that it will keep its current earnings multiple, and when the earnings per share go up, the share price will go up as well. He said that the accounting change is a modification to a rule that forces AAPL to count only 1/8 of their smart phone sales in a single quarter. In the future, they will be able to count all of their smart phone revenue in a quarter, instead of listing it under cash flow.
Cramer took phone calls on the following stocks:
Palm (PALM): Cramer thinks that the Pre sales will be disappointing, so he wants to stick with AAPL.
Infinera (INFN): Cramer wants to wait for a pullback before buying because it is up 10% today.
Segment 2: Off the Charts
Cramer looked at the chart of Flextronics (FLEX) because he thinks that the company is in a good position to benefit from increased electronic sales. FLEX does outsourced manufacturing for major electronics companies, so when their products are in high demand, the electronics manufacturing services companies benefit, and FLEX is the best of breed in that group. Technical analysts like FLEX because the chart shows that it is above its 50 day moving average, it has historically bottomed at its 50 day moving average so it has limited downside, and it looks like it could move up 24% before it would meet resistance. Cramer said that the fundamentals look strong as well, since it has low customer concentration with its top 10 customers making up 46% of sales, a higher utilization rate, plenty of room to increase capacity, the most exposure to the telecom sector, broad geographical exposure, and the stock is the cheapest in the sector at 12 times 2011 earnings. Cramer said not to worry that the stock is up 257% from its lows
Segment 3: Interview with Martha Stewart Living Omnimedia (MSO) CEO Charles Kobbleman
Cramer said that this stock was up 19% today on news that the company has a new agreement with Home Depot (HD) to design interior products. He wants to wait for a pullback before buying because of the big jump, but the pact is a big improvement from its previous agreement with Sears Holdings (SHLD). MSO got $18.8 million in royalties in 2008, which is should be able to surpass with its merchandise in all of Home Depot’s stores because it has quality products, but poor distribution channels. He talked to the CEO to about the changes at the company. Here is a summary of the interview:
1. Cramer asked if their business model will change now that they have a deal with Home Depot that will increase their retail sales, and the CEO said that the move to Home Depot as well as their increased presence in Macy’s (M) will be great for the company, and that analysts have a hard time following the business model of the company.
2. Cramer asked if carrying Martha Stewart’s products in Macy’s is good for their sales, and the CEO said that K-Mart hasn’t been keeping much of their product in stock, so it will be good for MSO and Macy’s when MSO’s contract ends with K-Mart in January.
3. Cramer said that it didn’t look like Martha Stewart was able to drive traffic to K-Mart, and the CEO disagreed.
4. Cramer asked why the company is basically paying K-Mart to end the exclusivity agreement, and the CEO said that they are doing it to get into Home Depot stores earlier.
5. Cramer asked if Martha Stewart is going to promote the switch, and the CEO said that she has millions of people following her on Twitter, in magazines, and on the radio, so she will get the word out.
6. Cramer asked if the new deal will change their revenue streams to 50% media - 50% retail from their current mix of 80% media and 20% retail, and the CEO said that he sees it heading in that direction.
7. Cramer asked if they will be able to sell more product types at Macy’s and Home Depot than they did at K-Mart, and the CEO said that they plan to take advantage of the opportunity to create more products.
8. Cramer asked how their relationships with Michaels and Costco (COST) are going, and the CEO said that they are working well so far, and that they plan to expand their sales in those stores.
9. Cramer asked about the health of the publishing business, and the CEO said that they have 4 great mazagines, and he sees a turnaround next year.
Segment 4: Lightning Round!
Canadian Solar (CSIQ): Cramer is bearish on this stock and said First Solar (FSLR) is the only solar stock he will recommend.
Ford (F): Cramer is bullish on this stock, but he likes the Ford Preferred (F-PS) better.
Movado Group (MOV): Cramer is bearish on this stock because it is too high end for the market right now.
Priceline.com (PCLN): Cramer is bullish because of their good business model.
Segment 5: Interview with American Tower (AMT) CEO James Taiclet
Last week, Cramer talked about the wireless tower companies as a new way to play the mobile internet tsunami, and AMT is one of the biggest companies in the sector. It has the most international exposure in the sector, and he wanted to talk to the CEO to find out more about their business. Here is a summary of their interview:
1. Cramer asked if he is on to something with his enthusiasm for the mobile internet, and the CEO said that Cramer is correct because people want to have the ability to connect to the Internet everywhere they go.
2. Cramer asked how to make money with a tower company, and the CEO said that the keys are having scale with a large number of towers in an area, having capacity to add antennas on each tower, and having a great sales force.
3. Cramer asked if they can fix AT&T’s (T) dropped call problem, and the CEO said that they continue to develop their networks, and they do that by leasing space from companies like them.
4. Cramer asked if they were just printing money right now, and the CEO said that they have 70% EBITDA margins now because they provide a great service to the wireless companies that cut their costs.
5. Cramer asked why their earnings look so low, and the CEO said that they should be measured on a free cash flow basis because of their depreciation schedule. Cramer agreed with his position.
6. Cramer asked about the impact of the stimulus plan on this company, and the CEO said that the broadband stimulus is fragmented, so it shouldn’t have much impact on the company.
7. Cramer asked if there is a max out point where the company can’t build any more towers, and the CEO said that only 15% of new cell sites need a new tower, so the ability to build new towers isn’t a big issue.
8. Cramer asked about their international sales, and the CEO said that they should boost U.S. sales, but they are still focused on America.
