Re-Valuing Apple (AAPL): Shares are Easily Worth $800
As Wall Street updates its price targets on Apple (Nasdaq: AAPL), StreetInsider is following suit.
Back in October 2010, we predicted shares would hit $500. This was well before Wall Street was even thinking $500. Now that numbers are out and everyone on the Street is moving targets closer to $600, it's time for us to take another look.
To say Apple busted the cover off the ball with its first-quarter earnings report would be an understatement. The company posted EPS of $13.87, 38 percent above the analyst consensus estimate. The number was also 49 percent above the company's own guidance for the quarter.
Looking at these "beat" rates, it is pretty clear Apple analysts are still well behind the curve and the company is just giving a 'worst case' number. It might be wise to just throw those out the window when trying to value the company.
A "real" number that can't be ignored is the growth rate. Apple posted first-quarter EPS growth of an astonishing 116 percent.
If the company can sustain this growth rate throughout the year then the company will post EPS of $60 per share for the year.
While it seems crazy Apple could sustain this level of growth, especially considering the law of big numbers, Apple has defied logic and in fact is seeing its growth rate accelerate -- not slow down.
With continued momentum for the iPhone 4S, a pending refresh of the MacBook Air, the likely introduction of iPad 3 in March, the iPhone 5 in late summer or early fall and an iTV by year end, growth only looks brighter. Apple's momentum may just be entering second gear.
What does this mean for the stock price?
We believe Apple will in fact post EPS of $60 per share this fiscal year (2012). If this is the case, the shares are currently just plain cheap.
For a long time now, Apple has not been getting credit for its growth. We don't expect that to change. However, slapping just the S&P 500 market multiple of 13.62x on this year’s expected earnings places the stock price around $817.
Also, consider Apple has $105 per share in cash. Back this out and the multiple goes to 11.9x
Looking at the above figures, traders will see it is not unreasonable or a wild prediction for shares to be an $800+ stock.
With Apple shares trading at $445 Wednesday afternoon, a price of $800 would suggest upside of 84 percent from current levels.
Disclaimer: Author long AAPL in IRA
Get immediate access to market moving news and alerts with StreetInsider.com Premium - FREE TRIAL!
Back in October 2010, we predicted shares would hit $500. This was well before Wall Street was even thinking $500. Now that numbers are out and everyone on the Street is moving targets closer to $600, it's time for us to take another look.
To say Apple busted the cover off the ball with its first-quarter earnings report would be an understatement. The company posted EPS of $13.87, 38 percent above the analyst consensus estimate. The number was also 49 percent above the company's own guidance for the quarter.
Looking at these "beat" rates, it is pretty clear Apple analysts are still well behind the curve and the company is just giving a 'worst case' number. It might be wise to just throw those out the window when trying to value the company.
A "real" number that can't be ignored is the growth rate. Apple posted first-quarter EPS growth of an astonishing 116 percent.
If the company can sustain this growth rate throughout the year then the company will post EPS of $60 per share for the year.
While it seems crazy Apple could sustain this level of growth, especially considering the law of big numbers, Apple has defied logic and in fact is seeing its growth rate accelerate -- not slow down.
With continued momentum for the iPhone 4S, a pending refresh of the MacBook Air, the likely introduction of iPad 3 in March, the iPhone 5 in late summer or early fall and an iTV by year end, growth only looks brighter. Apple's momentum may just be entering second gear.
What does this mean for the stock price?
We believe Apple will in fact post EPS of $60 per share this fiscal year (2012). If this is the case, the shares are currently just plain cheap.
For a long time now, Apple has not been getting credit for its growth. We don't expect that to change. However, slapping just the S&P 500 market multiple of 13.62x on this year’s expected earnings places the stock price around $817.
Also, consider Apple has $105 per share in cash. Back this out and the multiple goes to 11.9x
Looking at the above figures, traders will see it is not unreasonable or a wild prediction for shares to be an $800+ stock.
With Apple shares trading at $445 Wednesday afternoon, a price of $800 would suggest upside of 84 percent from current levels.
Disclaimer: Author long AAPL in IRA
Get immediate access to market moving news and alerts with StreetInsider.com Premium - FREE TRIAL!
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charles romeo on Jan 26, 2012 02:08 AMMark as Spam
Then why is all the Anal-Lyst calling for a drop below 400? I will tell you! "they missed the boat on Earnings and the big hedge funds don't like it, so they will talk down the stock, short the stock to get it to fall, so the big boys can get back in cheaper!