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NEW YORK (
) -- "I'm raising my price target on
," Jim Cramer told the viewers of his "Mad Money" TV show Tuesday.
He said that his $200 price target on the company no longer applies if a new accounting change goes into affect.
At issue are the Financial Services Accounting Board, or FASB, rules regarding how Apple can recognize revenue from its popular iPhone and less popular AppleTV products. Current rules force Apple to recognize this revenue over a 24-month period, meaning that sales today cannot be fully recognized for a full two years.
This rule is antiquated and just plain dumb, said Cramer, as it treats Apple differently just because it makes a smarter phone with better software. Meanwhile, rivals like
, which apparently make "less-smart" phones, are immune to the rule, he said.
Cramer said if Apple is allowed to recognize all of its true earnings, those earnings will skyrocket from an estimated $9 a share in 2011 to $12 a share. Given these new earnings, Cramer said his new price target for the company is now $264 a share.
But wait a minute, doesn't everyone on Wall Street know about these changes? Cramer said surprisingly, no. He said most money managers simply look at the "first call" estimates, and have not taken the time to dissect what this rule means for Apple's earnings. He said FASB is expected to revise these rules in the next few weeks.
Cramer said now is the time get in on the stock before Wall Street catches on.
Off the Charts
In the "Off The Charts" segment, Cramer went head to head with colleague Dan Fitzpatrick over the chart of electronics manufacturing outsourcer
According to Fitzpatrick, the chart of Flextronics is thing of beauty, with the stock extending gains over its 50-day moving average, after retesting that average five times in the last few months. Given that the stock broke down at $8.60 a share, Fitzpatrick sees shares headed back to those levels before meeting any additional resistance.
Turning to the stock's fundamentals, Cramer said he totally agrees with Fitzpatrick. He said the metric that matters in this business is utilization rate, and at 60% to 70% utilization, Flextronics is ahead of its peers.
But Cramer has lots more to love about the company, including its diverse customer base, which means that no single customer can hurt Flextronics too badly. Likewise, the company is also geographically diverse, making it immune to any one country's economy, he said.
According to Cramer, Flextronics also has reduced its inventory levels, begun manufacturing some higher-end products with higher margins, and has 21% of its business exposed to the red hot mobile device market.
Trading at just 12 times 2011 earnings, Cramer said he is a buyer of Flextronics, which he calls the best house in a sizzling neighborhood.
Martha's Expanding Plate
Cramer welcomed Charles Koppelman, executive chairman of
Martha Stewart Living Omnimedia
, to the show to discuss that company's new partnership with home improvement juggernaut
, which he also owns for his
Action Alerts PLUS portfolio.
Koppelman explained that the model at Martha Stewart Living changed several years ago, as the company transitioned from being strictly a publishing empire to one that included merchandising, media, and retail components. He said that the problem on Wall Street has been that retail analysts don't seem to understand publishing, and media analysts don't seem to understand merchandising.
Koppelman said that the company is scaling out of its agreement with K-Mart, owned by
, and is entering new partnerships with
, and now Home Depot. Koppelman said the opportunity exists to develop more products, and better products, at these new outlets.
Also on the agenda at Martha Stewart Living are possible food products to be distributed at
, as the company finishes up consumer tests at select locations.
Koppelman noted that a slight pickup on the publishing side in advertising. He said that his company's four magazines are highly targeted, and loved by consumers, and that helps make them attractive.
Cramer said he's still a fan of Martha Stewart Living, and said that he'd be a buyer on a pullback in the stock.
Wireless Infrastructure Play
Cramer spoke with
chairman, president and CEO James Taiclet about the need for more wireless infrastructure in the U.S. to handle the coming mobile Internet tsunami.
Taiclet confirmed that consumers now want to do everything they do on their desktop computers, on the go, and that's driving the demand for more wireless bandwidth. He said his company's success is based on their scale, capacity, and their ability to sell and deploy new solutions quickly.
When asked about the company's valuation, Taiclet said American Tower should be valued on its cash flow, due to complex depreciation rules that make its earnings tough to understand. He said the company maintains 70% gross margins, an incredibly high number compares to most other companies.
When asked whether Obama's stimulus plan would mean anything for the company, Taiclet said that the plan is too fragmented to affect earnings and is not a huge element of the company's growth plans.
Cramer was bullish on
He was bearish on
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At the time of publication, Cramer was long Home Depot.
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