Seeking Alpha
Recommended for you:
Long only, research analyst, portfolio strategy, media
Profile| Send Message|
( followers)  

I'll start off by clearly stating that I am no Apple (NASDAQ:AAPL) fan. I have never in my life owned an Apple product, and I may never own an Apple product. I dislike the company, the culture, and the whole atmosphere around "Apple." I'm a Microsoft (NASDAQ:MSFT) fan. I'm a Google (NASDAQ:GOOG) fan. I'm an Intel- (NASDAQ:INTC) loving, PC-loving, Apple-hating monster in the eyes of those loyal to what is seemingly America's number one loved company.

The Past

That being said, my dislike of the company and products has cost me dearly. Despite recognizing the importance of the MP3 player and centering a large project around a portable MP3 player while in college in 1998, I chose to not invest in the one company that would take such a concept and revolutionize the music industry forever. Despite recognizing the importance and impending popularity of the smartphone when Apple introduced the iPhone, I chose not to invest in the one company that would take this concept and revolutionize the fledgling smartphone industry.

The writing was on the wall for these two technologies and the company that would run miles ahead in the race. Apple grabbed them, held them high, and sprinted ahead of the pack in elegant form and with near perfect execution. I cringe every day I look at Apple's share price, not because of the sharp declines since September, but because I should have known better back in 2004.

(click to enlarge)

The Present

Do I know better now? This is the question I currently ask myself. Will the growth story at Apple continue? Does Apple have any current products or plans that place it in the same position as 6 and 9 years ago? Do I see another product on the way that will provide Apple with that next leg up for investors to grab onto for a wild ride to 300% profits over the next year?

To be completely honest, the answer here is simply "no." I do not see another revolutionary product in the pipeline. I do not see 300% growth in share price from present levels through 2013, and I do not see Apple as the growth story it once was without some new "must-have" product.

That being said, I certainly do recognize the strength of Apple's current line up of products, and I feel that Apple has yet to pass the pinnacle of their life cycles. There is still a lot of life left in and a lot of cash to milk out of the current iPod, iPhone, and iPad. To sell Apple short here as the stock has turned from being the investment everyone wants to be in to the investment everyone wants to stay away from is a mistake.

The fact is that Apple is way oversold. I can feed you numbers all day showing reported earnings of $54.5 billion, EPS of $13.81, cash on hand that amounts to nearly 1/3 of Apple's entire market cap, etc. Ask a hundred people, and you will get a hundred different opinions of how to chew through these numbers and spit out a price target, and 99, or maybe even 100 of them, will likely be wrong.

Apple's fundamentals are a powerhouse to be reckoned with, and the numbers Apple provides are enough to warrant a higher share price today than the current $450 per share. Still, Street sentiment is an obvious "hands off," and I would exercise some caution here, as I believe shares can be had for a bit lower price. $400 is my target, and it is based on a concept as simple as a gap fill from early in 2012, when Apple closed on 1/24/2012 at $420 and opened the next day at $454. It's too close to ignore, and while I would be a buyer here at $450, I'll take my chances and wait for "around" $400 for this gap to fill. Why $400? Because momentum often carries a share price beyond your mark.

The Future

While it's never certain, and while I admit a degree of bias, I see the future to not be as favorable for Apple as the past has been. I do not see exponential growth, and I do not see the potential for groundbreaking products on the horizon. I believe the grim reality of this has been making itself known in the share price, even if I find the reaction to be rather overdone.

To put this plainly, I do not see another iPod, iPhone or iPad for Apple to latch onto and propel itself to new heights. I actually see a repeat of the 1980s and '90s, where the PC took over and Apple sort of fell by the wayside. Google's Android will very likely dominate phones, tablets, and other devices in much the same way Microsoft took over and dominated the PC market. Opinion? Of course it is, and we'll see how it plays out. But without a new product and a fresh head start into a new technology, Apple is left with increasing competition on current product lines. As the Android user base grows, eventually "everything Apple" will gravitate towards "everything Android." Thus, the notions of the "iEverything" really should be left aside for now, until or unless Apple shows something tangible along those lines that drives people to ooh and ahh again.

Iphone 6 is not going to cut it. IPad Mini 2 is not going to cut it. It will take something like Google's project glass (not to be confused with Google Glasses) to be the next big leap, and for now, it appears that Google has the jump here. At some point, non-wearable computing will be clunky, old, outdated. But "at some point" is not here yet, and there's still lots of life left in existing handheld electronics technology.

This being so, the future of Apple as a company is strong for the immediate future. Throwing this figure or that under a microscope here will do little good. Until or unless Apple begins posting declines, and until or unless Apple's growth slows significantly, there is no reason that the company's performance and likewise, its share price, should not continue to increase from present levels. While I may be of the notion that the days of 300% growth may be loosely rooted in Apple's past, I see no reason to expect Apple will not post year over year impressive gains for at least the foreseeable 1- to 2-year future. For me, that is long term, and for me, I see value at current share pricing on at least a one-year play.

My intention? To purchase Jan 2014 $450 calls in Apple in short order if the share price reaches between $400 to $425. I see this as an extreme value play, and one that should pay off in spades over the coming year based on the fundamental strength of the company. Likewise, if you are long and have dug in your heels up to this point, I'd warn that dumping here near "the bottom" may be a bad idea, and listening to those who are now screaming "sell sell sell" is the same as listening to those screaming "buy buy buy" at $700 a share. When everyone seems to be screaming one thing, it's time to take a big step back and consider the big picture. Apple is a stronger company today than it was at the beginning of 2012, and joining the "sell" herd at its largest just as it is about to hit the cliff is a bad idea.

From both a fundamental and technical standpoint, $400 may seem expensive for an apple, but for this Apple, it's an absolute steal.

Source: I'd Pay $400 For 'This Apple'