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Apple Stock: Why Jim Cramer Seems Even More Bullish

Jim Cramer explained why stocks like Walmart and Costco should fare well in the short term, at least. The same factors probably justify buying Apple stock at current levels.

It is no secret that CNBC’s Mad Money host Jim Cramer is an avid Apple stock  (AAPL) - Get Apple Inc. (AAPL) Report enthusiast. For starters, the stock is an Action Alerts PLUS holding. Also, Jim has consistently urged investors to own, not trade this stock – due to the quality of the company’s fundamentals, contrasted with the distracting bullish and bearish cycles that the stock tends to go through on Wall Street.

Now, Jim appears to be even more favorable to an investment in Apple shares. The reason: the stock could weather fears over the resurgence of COVID-19 cases better than others.

Jim Cramer

Figure 1: The Street's and CNBC’s Mad Money host Jim Cramer

(Read more from the Apple MavenThis Expert Sees Apple Stock Falling 10%)

2020 déjà vu

In one of Cramer’s most recent takes, he explained that his WATCH stocks – an acronym used to represent top retailers Walmart, Amazon, Target, Costco and Home Depot – have “navigated the pandemic with flying colors and are the ones consumers trust most”.

While pandemic plays might seem like a stale topic of conversation at first, the trade has gained steam as COVID-19 has reemerged from the ashes to become a threat to the economy once again. See spike in new cases across the US in late July and August below.

Figure 2: COVID-19 new cases in US on July and August 2021.

Figure 2: COVID-19 new cases in US on July and August 2021.

The US has just reached the milestone of 70% of adults at least partially vaccinated. Therefore, the good news is that any impact that the pandemic might have on the economy will probably not be as severe as what was witnessed last year. Case in point, deaths and hospitalizations have remained low.

Still, the resilience of growth stocks (the Vanguard Growth ETF has just reached another all-time high) against those more sensitive to the economic cycles (the small cap-rich Russell 2000 is still 5% off the mid-March peak), coupled with treasury yields that have remained stubbornly low, suggest that the market has behaved more cautiously about the economic recovery in the past couple of months.

What about Apple?

Jim Cramer did not specifically name Apple in his list of potential winners in this "worse before it gets better" economic environment. But it is not hard to understand why Jim is probably as bullish on AAPL as some of the WATCH stocks that he has highlighted.

Apple’s most recent earnings report provides a clue. The Cupertino company delivered massive revenue growth across its product portfolio and major geographic segments (see below). While innovations like 5G and the M1 chip deserve some credit, the financial results also reflect consumers’ willingness to lavishly spend on tech devices and services, even past the thick of the pandemic.

Figure 3: AAPL FQ3 2021 revenue growth by major/geo segment.

Figure 3: AAPL FQ3 2021 revenue growth by major/geo segment.

Looking ahead, it is likely that Apple’s performance will depend more on secular growth stories (think business model shift to services, launch of mixed reality hardware and the Apple Car) than on the strength of the economy in the moment. For this reason, the stock is likely to fare better than average, should the market at large suffer from COVID-driven bearishness.

To be fair, some of AAPL’s upside may have been front loaded into June and July, making August a tougher month for investors. Still, I think Jim Cramer would agree that Apple stock is a good buy at current levels and given the current macroeconomic landscape.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)