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NEW YORK ( TheStreet) -- You have the right to overpay for a stock if you want to, Jim Cramer told "Mad Money" viewers Thursday as the markets finally greeted the Twitter ( TWTR) IPO. But for Cramer, the stock remains "outrageously expensive." Cramer said investors can pay two or three times what a company is worth if they choose, but he was trained to look at valuations when determining a stock's prices -- and that means looking a revenue and earnings growth and matching it to a company's peers. Using that logic, Twitter is only worth $28 a share, a far cry from the $45.10 where shares entered the market this morning. Cramer said if Kimberly-Clark ( KMB), Clorox ( CLX) and General Mills ( GIS) were all trading at 18 times earnings but then one of them spiked to 25 times earnings, that would be a big warning sign because all three stocks have the same growth rates. That's why Cramer said to "take the money and run." Cramer also reminded viewers that all but one of the social media initial public offerings from years past ended lower 12 months after their IPO. The lone exception: LinkedIn ( LNKD). So while the Twitter IPO didn't have the systemic problems that plagued the disastrous Facebook ( FB) IPO, the stock still remains highly speculative as these prices. Twitter only issued a sliver of their total shares outstanding, creating an unnaturally small float, which means its highly likely that more shares will be released in the coming months. Yes, Twitter is a terrifically popular and disruptive service, Cramer admitted, but today the value of Twitter the company and Twitter the stock diverged and Twitter the stock is incredibly mispriced.
The Rest of the Market
The media may be all a-flutter with Twitter, but Cramer said there are still 6,000 other stocks that make up the market and most of them didn't have a particularly good day today. There are a number of things weighing on the overall markets, including rumors of tightening in China, which has sent the industrials sharply lower. Cramer said the surprise rate cut by the European Central Bank also caught investors off-guard, causing the dollar to spike, which in turn sent commodities along with the independent oil producers lower as well. Expect continued pressure on those stocks as investors continue to digest this news, Cramer warned. Then there were disappointing earnings from Qualcomm ( QCOM), which dragged the tech sector lower, and disappointing news from Whole Foods Markets ( WFM), which knocked the wind from the sails of all the high-growth stocks including Starbucks ( SBUX), Hain Celestial ( HAIN) and Michael Kors ( KORS). As if that wasn't enough, the Twitter IPO certainly brought back fears of a market bubble, said Cramer. But in the end, he's still planning to use the market weakness as an opportunity to back up the truck for stocks that are down but don't deserve to be.
Executive Decision: Emil Brolick
In his "Executive Decision" segment, Cramer sat down with Emil Brolick, president and CEO of Wendy's ( WEN), which today delivered a two-cents-a-share earnings beat, but still saw its shares slide 11% on a less-than-stellar outlook for 2014. Brolick said he thought Wendy's was able to deliver a solid quarter but the expectations on Wall Street seem to have gotten ahead of themselves given today's weakness in the stock. He said that Wendy's continues with its brand transformation and has 180 re-imaged stores open with a total of 300 planned by year's end. When asked about the transformation, Brolick explained Wendy's has a long history of innovation and this transformation is touching all elements of the customer experience from employee uniforms to food packaging, to the dining space to the food itself. Brolick said the company is expecting a 10% to 20% increase in sales from all of its newly renovated stores. Looking to 2014, Brolick said the company expects only modest commodity inflation next year and is fully prepared to handle any pressures from food or labor costs. Wendy's will update its outlook for 2014 later this year. Cramer said the move in Wendy's is multi-year, not multi-day, which is why he remains a buyer of the stock.
