Apple (AAPL) just reported a tremendous quarter where earnings per share eclipsed 13.87 dollars a share, while revenue jumped 74% to 46.3 billion, and net income doubled to an astounding 13.1 billion. With Apple's recent earnings beating, S&P raised its full year EPS to 41 dollars a share which means that Apple is currently trading on a forward P/E of 10.9.
These numbers that were released model what growth investors like to see in explosive small and mid cap stocks, however Apple with currently a 422 billion market cap, it is acting like a start up company when it comes to growth rates. Apple is able to keep consumer loyalty by offering high quality and endlessly innovative products on the shelf that no other company can match. Although these numbers that were reported were astronomically high, I believe Apple will continue to deliver pulverizing earning beats for years to come.
With Apple's core products being the iPhone 4s, Mac computers, and iPads, Apple has only gained a majority share in only one product. Apple currently holds a 7% market share in computer sales, while the iPhone maintains a 45% market share in smart phones, and lastly the iPad presently has 68% market share. Although these numbers seem large, there are large opportunities for Apple to increase its market share.
Wasn't the new iPhone 4s supposed to flop? Wasn't the iPhone 4s the same design as the iPhone 4, with just a little extra called Siri? Well that one addition that cost Apple only a meager 250 million of its over-flowing 97.6 billion dollar cash position allowed Apple to sell more iPhones than ever. With a smart acquisition like this, Apple can offer virtually the same phone as the iPhone 4 and sell 37.8 million iPhones that equals a 128% advance from last year.
Although the iPhone sold a record amount during Quarter 1, it is now being sold in China which enables the company to attract 1 billion more potential customers. With the iPhone 5 coming out sometime this year, there will be some 'gotta have gadget' that will generate gargantuan revenue and help further increase market share.
In Quarter 1 of 2012, Apple reported that they have sold a whopping 15.4 million iPads, which represents a staggering 111% increases year over year. With Apple's new push into education with the new release of iBooks 2, Apple has made books cheaper for students which will contribute into students buying more iPads due to the money students will save off of textbooks via iBooks. With students being able to buy textbooks for a 75% discount, the iPads will sell themselves after a few years of school.
Where I see the most growth for Apple in the coming years is in Mac sales, where the company just sold 15.3 million Macs that equates to a 26% year over year gain. According to CNN Money, 27% of college students own a Mac, and 70% of incoming freshman are coming into college with Macs, which is a 15% year over year change. Although these statistics may seem pointless to some, they hold the key for Apple's immense growth. With all these college students already using Macs, they will prefer to use Macs in the workforce, which will contribute to where most computer sales are taking place being the corporate realm.
Apple computers are used in 1 out of 10 corporate computers and that number is growing at an explosive clip of 22% year over year. Forbes magazine tends to think that Mac sales are 16% of Apple's share price, so any major gain in market share could bring mammoth profits to Apple shareholders. While according to Forbes, the iPhone holds an astonishing 52% of Apple's share price, iPads making up 13%, and cash making up 19%.
With new products such as a revamped Apple TV, and other products that will come through the Apple Ecosystem pipeline in 2012, Apple will continually satisfy consumer demands. Apple is looked upon to most investors as a growth stock still, but with 97.6 billion dollars in cash, if Apple were to offer a dividend they would also attract value investors which could propel the stock much higher.
Disclosure: I am long AAPL.
