Even at $185, I'm Sticking with Apple

I don’t usually like to comment on share price movements, but Apple (AAPL) has shown quite a jump over the past couple of days. Shares are now priced at $185, up from their 52-week low of $78.20.

According to John Paczkowski of Digital Daily, an analyst at Neeham and Company recently issues a price target of $235 per share. This seems crazy on the surface, but the thesis makes some sense. The analyst assumes that the iPhone captures 20% of its market, up from 12.5%. The thought is that software apps will drive hardware adoption.

I’m not quite as skeptical as H.J. Huneycutt when he says, “Great company or not, it simply doesn’t look attractive over $170.” However, I do recognize that Apple must continue to innovate for its growth to continue.

Apple had operating cash flow of about $9.6 billion in 2008, and it has a market cap of about $165 billion or so. It doesn’t look like an overvalued company on that basis. Still, there is a certain gravity pulling on a company like this. Apple makes cool stuff. People want Apple's cool stuff, and many already have its cool stuff. So how much are people willing to pay to upgrade to their cooler stuff next year? The year after that?

For now, I want to own some Apple shares. It is a very strong company that still has upside to its revenue and earnings. In my estimation, Apple could reach a $300 billion market cap over the next five years. That would equate to about 15% annualized growth. To achieve these growth rates, however, Apple must continue to raise the bar on its innovations annually. At this point, I’m not betting against a company that has achieved so much success.

Comments

[Jascam:]

Aapl will be the next Msft

Sep 21 06:15 AM

[Jon T:]

"Aapl will be the next Msft"

No it won't. The DNA is utterly different.

Why does Microsoft spend $6 for every $1 Apple spends on R&D, and yet has nothing to show for it?

Not a very thought provoking article.

Sep 21 08:47 AM

[dick black:]

Lets make some assumptions
The regular people -not the my stock predictions are always correct class- are in a financial slump.
Assuming regular people last bought a cool thing for themselves in late 2008 early 2009 and assuming that this "mess" we are in does not see real light until October/November 2010 in time for Christmas then I predict AAPL to be @ approximately $250 to $275 @ close of options January 2011.
This is based on a surge of buying for back to school and Christmas 2010 and option pumping in late December '10 and early January '11.
Disclosure: I am an iPhone carrying Mac tech support providing, Apple fan boy that got burned last year by buying Jan 2010 $200 calls @ $40 -sigh-.

Sep 21 12:40 PM

[Advill:]

You are ignoring the effects worldwide of what is already old stuff in USA, in China they are in the same moment with Iphone as it was in US 3 years ago, India or Indonesia...etc. the same.

Sales of wanabies are declining in China because the "real stuff" is available now.

The main region for sales of Rolex watches...is China, we do not understand the psique that moves hundred of millions in Asia, it is all Occidental values and ideas oriented, Gucci sells in Roma most of their products to japs and chinese tourists, Channel in Paris just the same (russinans included) Iphone is in the same league.

Regards.

Sep 21 02:00 PM