Apple Inc. (NASDAQ: AAPL) is trading at an unusually high price-to-earnings (P/E) ratio of 33, significantly above its ten-year average of 21.
While some skeptics see this as a warning sign to sell, renowned investor Jim Cramer believes the stock’s elevated valuation is justified.
Cramer, the host of CNBC’s Mad Money, argues that Apple’s true strength lies in its revenue model, which continues to grow and diversify, making it a solid investment even at these high multiples.
Apple shares have surged over 30% in the past five months, solidifying its position as the world’s most valuable company.
Despite concerns about its lofty valuation, Cramer is bullish on the stock, particularly due to Apple’s consistent ability to innovate and generate steady revenue streams.
Where does Apple stand in terms of its AI push?
One of the key drivers of Apple’s recent success is its strategic push into artificial intelligence (AI).
Apple has partnered with OpenAI to integrate ChatGPT into its devices.
Surprisingly, Apple did not pay OpenAI in cash for this collaboration.
Instead, OpenAI accepted exposure to Apple’s massive user base of over 1 billion people as sufficient compensation—underscoring the immense influence Apple wields in the tech industry.
Cramer sees this partnership as a major win for Apple, as it allows the company to incorporate cutting-edge AI technology without the heavy financial burden often associated with AI investments.
This deal not only enhances Apple’s product offerings but also strengthens its position in the AI race without overspending, further justifying its high valuation.
Apple’s much-anticipated “It’s Glowtime” iPhone event, scheduled for September 9, has traditionally been met with mixed reactions.
Cramer, however, views any post-event weakness in Apple stock as a buying opportunity.
He acknowledges that while new product launches are often seen as underwhelming, Apple’s long-term growth prospects make it a solid investment regardless of short-term market sentiment.
Cramer also points to Apple’s consistent financial performance and innovation as reasons why investors should remain confident.
He notes that the company’s ability to introduce new products and technologies, while maintaining a strong revenue stream, makes Apple stock attractive even during market fluctuations.
Cramer has confidence in Apple’s incoming CFO
Another factor contributing to Cramer’s confidence in Apple is the recent announcement of a CFO transition.
Apple plans to replace Luca Maestri with longtime executive Kevan Parekh.
Cramer expects this leadership change to be smooth and sees it as another positive catalyst for the stock.
He believes Parekh’s deep understanding of the company will ensure continuity in Apple’s financial strategy, further reinforcing the company’s strong position in the market. Cramer remarked,
It’s one more reason why Apple’s worth so much money. Other companies wish they had Apple’s consistency and management depth. You can’t sleep well at night with most tech stocks, but Apple has made it easier this time.
Wall Street analysts also echo Cramer’s optimism.
The consensus rating on Apple stock is currently “overweight,” with an average price target of $247, representing a potential 12% upside from its current price.
Despite concerns over its elevated valuation, analysts continue to see growth opportunities for Apple, driven by its strong product ecosystem, AI integration, and financial consistency.
Apple’s high P/E ratio may raise eyebrows, but Cramer argues that the company’s strong fundamentals, sticky revenue streams, and strategic investments make it worth the premium.
With a modest 0.45% dividend yield and consistent financial performance, Apple remains one of the most bankable tech stocks on the market.
As Cramer points out, Apple’s leadership, innovation, and ability to navigate challenges make it a reliable choice for long-term investors.
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