Apple (AAPL) - Get Apple Inc. Report is a ‘hold, don’t sell stock,’ Action Alerts PLUS charitable trust portfolio manager Jim Cramer tells club members. And now the AAP team sees a $400 price target in reach of the tech giant.
Cramer prodded Apple to break out its services revenue before Luca Maestri - whom Cramer calls Apple's "fabulous" chief financial officer - and Chief Executive Tim Cook decided to finally measure just how much services are driving the company.
"[For] years I harped on the service revenue, said guys, you gotta break out the service revenue. ... And they would say, 'no, Jim, no, won't help anybody,'" Cramer told the members on the call.
Cramer says he told the company that if it didn't break out service revenue, "I am going to tell you that you're going to have a 12 to 13 multiple forever. With the service revenue, you can be like Procter & Gamble.
“Well, sure enough, they finally broke the service revenue out and they are like Procter & Gamble. They have very similar price ... models.”
“So then the last two years I’ve been harping on them to be able to say ... if you buy a device ... you buy the razor ... we can figure out how much that customer is worth,” Cramer said.
“By the way, it’s not going to be a Dollar Shave Club. You're not going to leave it because there's 99% satisfaction for Apple. So you should be able to say, OK, the Apple person then takes Apple Plus [and the] Apple product to keep your pictures, takes Apple Care, and you can build the revenue stream and you can say, OK, the lifetime average of an Apple user is X. ...
“I think I've worn them down. I think they’re going to give it to us this time. And you’re going to see that the stock is worth $400. I'm not telling you to buy it necessarily today. But I think the stock is still an own-don't-trade stock."
And Cramer also lauded the Apple Pay contactless payment system.
Apple is set to report fiscal third-quarter results on July 28. A survey of analysts by FactSet produced consensus analyst estimates of $1.99 a share of profit on revenue of $50.72 billion.