NEW YORK (TheStreet) -- Apple (AAPL) needs to come up with revenue streams beyond iPhones during 2016, as investors believe that any company involved with cell phones will see a downturn, TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning.
Shareholders don't own Apple stock for an "upside surprise," but rather because they believe it's an inexpensive stock that will be able to come up with a better revenue stream, Cramer contended.
He noted that Apple can "prove it's more than just cell phones" by either buying or producing a second revenue stream.
A possible acquisition for Apple CEO Tim Cook should be Harman (HAR), Cramer argued. The manufacturer of professional audio, video, lighting and control systems is "deeply embedded" in the BMW, Lexus (TM) and Mercedes (DDAIF) families.
Apple should acquire Harman in time to insert its technology into cars worth $100,000, Cramer explained. The company needs to own cars' Internet of Things to pair with its mobile phones.
"Look, it isn't too much to ask for Apple to stop its endless buyback and increase its exposure to the other mobile force - autos. It must be the brains of your car...all cars. Right now, that's Harman. Why not just buy them for $9 billion? Shareholders won't even notice the lack of cash, but the analysts would be forced to revise their numbers to include recurring revenue streams from different auto companies as they come on stream," Cramer stated.
Cramer added that another area of great growth could come from partnering with Nike (NKE) to create highly competitive wearables.
"And can we now see that partnership between Tim Cook and Nike produce the ultimate wearable? Can these make up for a shortfall in cell phones? Wrong question. They create additional recurring revenue streams that are currently not in the numbers," Cramer noted.
Shares of the iPhone maker are falling 1.79% to $103.38 on Monday morning.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate APPLE INC as a Buy with a ratings score of A. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, robust revenue growth, notable return on equity and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- APPLE INC has improved earnings per share by 38.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, APPLE INC increased its bottom line by earning $9.20 versus $6.43 in the prior year. This year, the market expects an improvement in earnings ($9.77 versus $9.20).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Computers & Peripherals industry average. The net income increased by 31.4% when compared to the same quarter one year prior, rising from $8,467.00 million to $11,124.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 25.4%. Since the same quarter one year prior, revenues rose by 22.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 45.95% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.59% is above that of the industry average.
- You can view the full analysis from the report here: AAPL