We recently published a list of Jim Cramer Latest Lightning Round: Top 10 Stocks to Watch. Since Apple Inc (NASDAQ:AAPL) ranks 2nd on the list, it deserves a deeper look.
Jim Cramer in a latest program on CNBC talked about the latest rebound in the market.
Cramer said that the key reason the market roared to highs was strong earnings from top banks. He said since the Fed's interest rate cuts have just started, investors believe maybe the "best is yet to come."
Jim Cramer wondered whether this strong performance trend would be a "pattern" in this earnings season.
Cramer recommended investors to "listen to the calls" this earning season and "ponder a moment, and only then should you pull the trigger."
For this article, we watched the latest episodes of Jim Cramer's 'Lightning Round' segment on CNBC and picked 10 stocks he was talking about. With each company, we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A wide view of an Apple store, showing the range of products the company offers.
Number of Hedge Fund Investors: 184
Talking about an analyst downgrade on Apple Inc (NASDAQ:AAPL), Jim Cramer acknowledged that iPhone maker is facing some "near-term" headwinds but urged investors to buy the stock.
Almost every bullish case on Apple Inc (NASDAQ:AAPL) was built around this assumption: millions of people would rush to upgrade their iPhone because of AI features. But the latest numbers for iPhone 16 do not show much enthusiasm for the new device.
Apple Inc (NASDAQ:AAPL) has been seeing a long-term decline in mobile carrier upgrade rates, especially postpaid, for several years. This suggests that people are holding onto their devices longer, likely due to economic factors, satisfaction with current technology, or a lack of exciting new features in recent models. This trend isn't great for Apple Inc (NASDAQ:AAPL). Can Apple Intelligence break this trend? We'll find out soon.
However, the assumption that we will see a huge upgrade cycle of iPhone just because of AI is big and comes with a lot of risks. Apple Inc (NASDAQ:AAPL) trades at a forward PE multiple of around 35x, well above its 5-year average of nearly 27x. Its expected EPS forward long-term growth rate of 10.39% does not justify its valuation, especially with the iPhone upgrade cycle assumption. Adjusting for this growth results in a forward PEG ratio of 3.33, significantly higher than its 5-year average of 2.38.
Vltava Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
Overall, Apple Inc (NASDAQ:AAPL) ranks 2nd on Insider Monkey's list titled Jim Cramer Latest Lightning Round: Top 10 Stocks to Watch. While we acknowledge the potential of Apple Inc (NASDAQ:AAPL), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.