On tonight’s MAD MONEY on CNBC, Jim Cramer was touting growth stocks he deems cheap, even though the prices sound high.
Google (NASDAQ:GOOG) is Cramer’s first cheap growth stock. With 34% long-term growth, and some fund managers paying 50-times earnings for that growth rate, his assumption to get to $750 is only 37-times 2008 and he thinks it is cheap and headed higher. Cramer thought he’d have seen $675 if the market wasn’t so bad Friday. It’s also a window dressing stock, similar to the list we recently gave. We also gave our recent "How long until $1,000" question in relation to higher and higher analyst targets.
His second stock that is still cheap is Intuitive Surgical (NASDAQ:ISRG) even at $285 per share. We noted "Bionic Man Earnings" on this one last week. The stock held up on Friday and the momentum investors think it may be over, but they are wrong. He loves the robotic surgery da Vinci device that allows for open heart procedures to be done with micro-incisions and that shortens hospital stays drastically. He also likes the 40% recurring sales after the da Vinci system sales are made for disposable parts and only 17 systems sold overseas last quarter. If you use forward earnings estimates its PEG ratio is about 1.5, and that is cheap for the growth here according to Cramer.
On a call-in, Cramer said that despite the multiples, Baidu.com (NASDAQ:BIDU) shares are heading higher. You’ll have to chase that one on your own. The Alibaba IPO may draw more attention to the Chinese web space, but we noted previous lessons from the dot.com bubble here previously and noted how the stock was fighting to hold $300 recently. This company will have to do much more than just beat its forward earnings.
Jon C. Ogg
October 22, 2007