Morgan Stanley’s call on Apple defies conventional wisdom

CNBC’s Jim Cramer said Monday that it would be a “mistake” to buy shares of Apple ahead of its quarterly report next week — despite what Morgan Stanley says. 

Morgan Stanley upped its price target on the stock to $247 from $231 Monday, which triggered the stock to rally 2.3% during the session.

“One thing’s for sure after this run, it would be a mistake to buy Apple going into the quarter, unless you get a meaningful pullback beforehand, the “Mad Money” host said. “The gulf between the bulls and the bears is just too wide for us to game Apple.”

Cramer has stressed that buying the stock of a company before it reports earnings is a risky venture. He called the bullish take from Morgan Stanley equity analyst Katy Huberty a “bold move.”

Huberty wrote in a note that Apple is an “attractive setup into earnings,” predicting that the company’s services business could have grown more than 16% against the backdrop of negative investor sentiment and conservative guidance.

Still, at least one Apple analyst at Sanford Bernstein thinks there may be weakness in the services segment and that it would grow about 12%, Cramer noted.

“We hate it at ‘Mad Money’ when stocks run [going] into earnings … the reaction of a stock to what we call the ‘print’ will often depend on what it’s done beforehand, and that comes down to these kinds of calls,” Cramer said.

“If Apple fails to raise estimates, if it doesn’t talk up its service business, you’ll find yourself on the wrong side of the trade,” Cramer said. “If the quarter’s good, you’ve already borrowed some of that upside, if it’s bad, look out below.”

Still, the host recommends investors sit on the sideline and digest Apple’s report. It’s a stock he always says you must own and never trade.

In the event that the stock takes a hit after the conference call, “you’ll be able to buy some more into weakness. Maybe at much lower prices than where it went out today.”

Cramer also warned that Wall Street analysts have an “outsized ability, right now, to move stocks, particularly tech stocks,” during earnings season. The analysts played a heavy hand in the 17-point gain on the Dow Jones Industrial Average, 0.28% run in the S&P 500 and the 0.71% increase on the Nasdaq Composite.

It was “a big victory for the bulls,” he said.

Disclosure: Cramer’s charitable trust owns shares of Apple.