Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
NEW YORK (TheStreet) -- Don't let the critics dissuade you, Facebook (FB - Get Report) is a must-own stock, Jim Cramer told his Mad Money TV show viewers Thursday. Cramer said this stock, which he owns for his charitable trust, Action Alerts PLUS, still has a lot of room to run.
It's inevitable that when a stock sees the kind of growth that Facebook has, the critics will be out in force, comparing the company's market cap to that of high-profile names in the Dow Jones Industrial Average or the S&P 500. But these comparisons don't mean a thing, Cramer continued. The only thing that matters is earnings.
Facebook is expected to earn $3 a share in earnings and is currently growing at 60% a year. Cramer said money managers are willing to pay twice a company's growth rate, but in this case he used just half its growth rate for his calculations. That means Facebook is worth 30 times $3, or $90 a share.But what if those earnings estimates are too low, or its multiple too conservative? Cramer said the fact is that Facebook deserves to be trading higher because after a slow start, the company just about has a monopoly on mobile advertising. That monopoly will be worth big bucks in the "out years" of 2016 and beyond, he concluded.