Cramer: 2nd Company Out-Innovating Apple?

CNBC
Cramer: 2nd Company Out-Innovating Apple?
.

View photo

Getty Images

(Click for video linked to a searchable transcript of this Mad Money segment)

Cramer believes developments on Monday show that another company is out-innovating Apple (AAPL).

And that company is -- McDonald's (MCD)! Huh?

Cramer knows that it seems strange to compare a tech titan to fast food giant. But in this case, he believes it's warranted.

That's because quality of innovation is an important factor behind a stock's multiple and on Monday, the Mad Money host felt McDonald's and Apple presented extreme examples.

McDonald's

Looking at the quality of innovation at McDonald's, Cramer said that the company wowed Wall Street with much stronger than expected sales (MCD) figures due to the success of new products.

Specifically, McDonald's cited their new chicken McWraps and egg white McMuffins as powerful innovations. Also, they said the popularity of late-night breakfast items are driving growth.

It's just this kind of innovation that Cramer believes will command attention from Wall Street. That is, if these products are popular, people will probably tell their friends about them, which in turn will drive more traffic at McDonald's. The result should be increased profits.

--------------------------------------------------
Read More from Mad Money with Jim Cramer
Game Plan: Strategies for the Week Ahead
Checklist: 6 Bull Reversal 'Tells'
Cramer: Jazz Up the Portfolio
--------------------------------------------------

"I think the analysts will look at numbers and decide their estimates are too low and they need to be raised," Cramer said. Therefore I believe, the excitement about the innovation should propel the stock even further than its gains on Monday."

Apple

By comparison, Cramer felt that innovations revealed during Apple's Developer's Conference left the Street underwhelmed. "They talked about incremental positives and changes in the ecosystem," he said.

That not to say the developments aren't important - they are; but they're not likely to drive significant buying. "I don't think they will create a mad dash to the Apple store," Cramer said.

And if tech faithful aren't blogging about these developments and counting the days until the innovations hit shelves, Cramer doesn't believe shares will rally in any significant way.

"Apple just didn't provide the OMG factor that's needed to propel estimates and therefore the stock, higher," he said. "And until they do I think Apple is dead money."

Disclosure: On June 10th Cramer owned Apple on behalf of his charitable trust.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com



More From CNBC
View Comments (15)