Apple (AAPL) Could Sees Strong Back-Half of 2014 on Larger iPhone, Lagging Competition
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Price: $169.89 --0%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.5%
Revenue Growth %: -4.3%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.5%
Revenue Growth %: -4.3%
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Apple's (Nasdaq: AAPL) bigger iPhone 6 display should be a boon for investors.
Barron's commented over the weekend that an iPhone with 4.7- or 5.5-inch display could draw in new buyers and add to Apple's bottom line. One recent analysis pegged a larger iPhone adding 10 to 15 percent to the company's earnings for 2014. That could possibly propel shares of the company, which are still at a discount to peers, up 20 percent, excluding dividends.
There are two potential catalysts for downside in Apple: one is that its markets are already saturated and its 38 percent gross margin seems unsustainable. The second is that Apple is moving away from the Steve Jobs era, becoming a less innovative and more bureaucratic company.
Apple's business model is more than just hit products, though; the company runs more on a hardware-as-a-service basis. While the iPhone might not be at the top of the charts when it comes to tech specs, those buying the device know they'll be getting solid software and continual upgrades to keep the device relevant, and keep users hooked.
The iPhone upgrade rate per quarter recently fell from 10 to 11 percent in 2011 and 2012 to 9 percent last year. Analysts expect 2014 to see upgrades returning to peak levels, if not better, which has been around 12 to 14 percent per quarter. Stronger iPhone 6 sales could add $3 per share for Apple's quarters ending in September and December.
Key factors going for the end of this year for Apple include lack of inspired, high-end, Android-based smartphone debuts at 2014 Mobile World Congress in Barcelona and competition among U.S. carriers to allow customers to upgrade smartphones ahead of two-year contract expirations.
Apple is valued at around 12 times CY14 EPS expectations, versus 16 times for the S&P 500. Excluding $159 billion in cash and that multiple drops to eight times 2014 earnings for Apple.
Additionally, with the appointment of a new CFO, many suspect that Apple will implement another capital allocation strategy which will benefit shareholders even more. The company could announce a higher dividend or richer buyback program with its April report, according to some analysts.
Shares of Apple are up over 1 percent early Monday.
Barron's commented over the weekend that an iPhone with 4.7- or 5.5-inch display could draw in new buyers and add to Apple's bottom line. One recent analysis pegged a larger iPhone adding 10 to 15 percent to the company's earnings for 2014. That could possibly propel shares of the company, which are still at a discount to peers, up 20 percent, excluding dividends.
There are two potential catalysts for downside in Apple: one is that its markets are already saturated and its 38 percent gross margin seems unsustainable. The second is that Apple is moving away from the Steve Jobs era, becoming a less innovative and more bureaucratic company.
Apple's business model is more than just hit products, though; the company runs more on a hardware-as-a-service basis. While the iPhone might not be at the top of the charts when it comes to tech specs, those buying the device know they'll be getting solid software and continual upgrades to keep the device relevant, and keep users hooked.
The iPhone upgrade rate per quarter recently fell from 10 to 11 percent in 2011 and 2012 to 9 percent last year. Analysts expect 2014 to see upgrades returning to peak levels, if not better, which has been around 12 to 14 percent per quarter. Stronger iPhone 6 sales could add $3 per share for Apple's quarters ending in September and December.
Key factors going for the end of this year for Apple include lack of inspired, high-end, Android-based smartphone debuts at 2014 Mobile World Congress in Barcelona and competition among U.S. carriers to allow customers to upgrade smartphones ahead of two-year contract expirations.
Apple is valued at around 12 times CY14 EPS expectations, versus 16 times for the S&P 500. Excluding $159 billion in cash and that multiple drops to eight times 2014 earnings for Apple.
Additionally, with the appointment of a new CFO, many suspect that Apple will implement another capital allocation strategy which will benefit shareholders even more. The company could announce a higher dividend or richer buyback program with its April report, according to some analysts.
Shares of Apple are up over 1 percent early Monday.
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