Cramer Backs Genentech
After Cramer sort of touted WCI Communities (WCI) and told you to put it on a watch list, he discussed a stock that is acting like a winner.
Cramer noted that Genentech (DNA) was around $100 a year ago, but the company had the best business in 2006. The growth was more than double and it beat estimates and raised guidance and kept finding new uses for its drugs, but the stock is lower than it was 14 months ago. If you look at it another way you can use earnings and multiples to determine price. So the multiple is coming in and the market wasn’t willing to pay as big of a multiple for its growth. Cramer said multiple contractions are about to change to expansion: he noted a Congressman could hurt growth because of legislation, but the company has self imposed caps and is considered immune to politics; it has no inflation risk; Cramer thinks it is going back to where it was and may even go higher. Cramer has discussed this numerous times before. He thinks it can go to $104.00 and could be worth 40 times earnings, which if that happened it would be at $140.00 if that were to happen. The bearish case is $104.00 to Cramer and the bullish case is $140.00.
Jon C. Ogg
January 18, 2007