8 Reasons To Buy Apple Stock Now 30 comments
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Bear Stearns analysts Andy Neff, Bill Hand and Ted Chung sent a note to clients this morning following Apple's (AAPL) announcement of a new developers' platform for the iPhone. Key excerpts:
WHY NOW? EIGHT COMPELLING REASONS. Despite current anxiety, we view current weakness in AAPL shares as an opportunity to add to positions based on our assessment of several positive inflection points:
1. WIDgets. With iPhone SDK launch today (3/6), AAPL further extended its lead in the emerging WIDget (Wireless Internet Devices: GPS, email, TV/video, social) market. Making media content portable is a 200mm unit (annual) market; making phones portable is over a 1bn unit market. WIDgets is somewhere in between.
2. VIDEO. Going forward it's not about music: it's about video. All the pieces are falling into place: AppleTV, video content, video rentals. Think non-linearly about an Apple TV-based HDTV.
3. INTERNATIONAL AT INFLECTION POINT. While Apple generates ~60% of sales from Americas, recent unit data points to acceleration in Europe, Japan & Asia.
4. MORE iPHONE MODELS, FEATURES. We expect to see more iPhone models (a la iPod), including 3G along with new features/apps in the coming months.
5. MAC MOMENTUM. With competitively priced products and growing mind share, we see continued momentum in Mac sales.
6. NEW iPOD DEMAND. It's no longer just about music, but it's about video & Internet access.
7. AND IT'S ALL SHIPPING. Three concurrent product cycles: Mac, iPhone, iPods with video coming on.
8. NOT ON HYPE-DRIVEN VALUATION. And the valuation (selling at 14x our CY09 op. EPS or 13x our CY09 cash EPS) is more reasonable.
· SEVERAL RISKS: Consumer spending particularly in the US/Europe (85% of sales). No single catalyst. Business model gets more complex with size. Are they innovating fast enough? Are they innovating too fast? Where are all those iPhones? Can AAPL keep beating expectations?
· NO EST CHANGES. We're maintaining our (reported) GAAP EPS for FY08 of $5.10, for FY09 of $6.50 and for 2Q08 of $1.08 (vs. $0.87).
· MAINTAINING TARGET. Given these multiple catalysts, we're maintaining our CY08 target of $220 using a 29x P/E on CY09 op. EPS plus $24/sh in net cash.
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This article has 30 comments:
It's not everything I always wanted, but holy smokes the potential. This has turned the corner from being Jobs' "hobby". This is the home device that every iPod owner will want. and there are, ahem, a few of them out there.
Your Reason #2 is spot on.
It is not some wall street guy trying to critique Apple's software development API's like i've seen on other seekingalpha posts.
"1. WIDgets. With iPhone SDK launch today (3/6), AAPL further extended its lead in the emerging WIDget (Wireless Internet Devices: GPS, email, TV/video, social) market. Making media content portable is a 200mm unit (annual) market; making phones portable is over a 1bn unit market. WIDgets is somewhere in between."
I agree with this general idea, but the iPhone SDK is MUCH more important than the author would have us believe. The SDK appears to be as identical as possible ( streamlined ) to the one already used by mac developers.
The iPhone SDK is Apples first step in taking over the business/enterprise market. Developers are already foaming at the mouth to program on this touch based device, and Apple is encouraging this full force with both an extremely streamlined store for developers to sell their projects, but an $100M ifund to own...err...encourage the startups that succeed on the iPhone.
So what's so historic about all these developers working on apps for a phone ?
ALL of these apps will easily be ported to WHATEVER other mobile/wireless/touch devices apple can imagine. The macbook air already uses many "gestures" , I can all but guarantee we will eventually see a touchscreen tablet, etc. So Mr. Jobs has somewhat clandestinely set the stage for an army of developers to make not only games/entertainment/so... apps/ but many many business /productivity apps as well.
Once Mr. Jobs has enough of the upper crust throwing out their blackberry's in favor of the iphone, he will move into the desktops ( if they still need them ) of these business and then their servers etc. With the iPhone SDK , the iphone will become so painfully robust with apps that the only people holding on to blackberry's will be those that can't afford to switch, those that are too cheap, those that are stubborn, and finally those that still prefer the keyboard. This is most likely not going to a thriving demographic of "smartphone" users.
So, we have 1,000's of working apps being developed for a computer that will sit in the pocket of businessmen. Once they become accustomed to the interface, do you think they will be more likely to ask their IT department about "switching" ? I think it is much more likely.
In short and IMHO:
The Iphone SDK was the business equivalent of Apple throwing a bunker buster into the enterprise space. Blackberry will be a easy battle in this space, Microsoft is the real "challenge". Apple will be able to use the Iphone to push their products, especially computers and operating system, to enterprise in a very aggressive way for the first time. Microsoft should watch their back, because I frankly don't know how they would stop this. I still stand by my view that Ballmer just does not know what he is doing anymore.
disclosure: I am a college bum that owns a measly amount of apple shares...
Do you have an iPhone? I've been a "grown-up" for 20 years or so and don't care too much about any cool factor. The iPhone is a fantastic phone and organizer and the SDK apps will make it just crazy good. Folks in suits using iPhones won't deter any of the teens or 20-30-somethings. If they want a stupid looking case to jazz up the phone, they'll get one.
Apple TV stinks as do itunes movie rentals. the quality just doesn't cut it and will lose against Blue Ray rentals and Comcast on demand HD.
aapl will sell 10 million iphones, yes. Come September the iphone price will be reduced by atleast 100 dollars. 3 million iphones at 100 dollars less profit do the math. And mac are competing with new imac look a likes from Gateway and Dell. Sorry. Come April aapl will dissappoint and the street will slaughter the stock once more because aapl growth will have slowed to a crawl.
Are you suggesting then that the young consumers desiring the "cool factor" will rush to purchase Windows CE or Blackberry devices instead?
crowdofcheerleaders should know that plagiarizing the iPhone technology covered by over 200 patents is not a viable option.
There are advantages that Apple has established in preparing the groundwork for the iPhone, such as the iTunes store, OS X, collaboration with carriers to support custom features, the iPod, Apple retail stores, and a robust ecosystem, that makes it difficult and expensive for competitors to match. Yesterday's announcement shows that like the iPod, iPhone will prove to be a moving target as well for others to emulate. It might make more business sense for others to give up the smartphone market now and concentrate in the low end, rather than to throw money at trying to come up with an iPhone killer. The iPod killer sure didn't pan out, did it?
Apple's stock price is not indicative of the prospects for the company. If it was, it wouldn't have been selling less than $10 five years ago. The stock has dropped due to the alarmist nonsense published about the company after the latest earnings release. These are analysts who are trying to estimate revenue and earnings based on projections (although false) of Apple's current products into next year and beyond. They don't account for any new features and new products that will change or expand the market. And they can't. They don't know what is going on in Apple's R&D.
The same Exchange integration announced for the iPhone can be just as easily extended into the Macintosh platform. iPhone is a foot in the door of the door in the enterprise market, just as the iPod was for the consumer market. XCode can just as easily be tapped to develop custom business applications after corporations have a chance to try it out on the iPhone.
Consider also that no PC manufacturer has been able to create a viable tablet PC. None have been able to mass market it. Apple has most of the ingredients to make such a tablet. They have a phenomenal touch screen interface technology, they have experience in miniaturization and power management, they have an optimized OS that can work with new processors coming out of intel, they have support in the form of all the drivers, networking technology, peripheral and wireless connectivity. They also have the economics of scale to procure parts at best possible prices. In other words, Apple can offer it at a price that they can make the, good profit but that others will not be able to match.
No offense, but how many "suits" out there in the buisness world have an iPod? My guess is a lot. Business people with iPods haven't diminished the "cool" factor for teens & 20-30 somethings over the last 6 or 7 years, so I don't see that happening for the iPhone either.
George Bush has one, and even THAT hasn't "killed the Kool".
"China's inflation at 7.5% will create a collapse in that economy when no one in the U.S. is able to buy those expensive exports."
I stay awake worrying about the US economy, but who's to say teh Chinese can't buy Apple products?
"Don't Buy Apple until Mr. Jobs announces a Stock Buyback with that Pond of Cash that he has."
Maybe Jobs is waiting for Adobe to drop so he can buy them. Maybe they want a wad of the 700 MHz spectrum. Maybe Job's keeping a wad as a hedge against the US economy. Apple was a "beleagured" company financially about a decade ago. I want them to exercise extreme caution with that money.
Mary
www.NationalShowTicket...
Why Apple will hit $250 by December 2008?
appleinnovation.blogsp...
Apple Inc. (NASDAQ: AAPL) is one of the Top 20 Innovators of The Innovation Index, and the number one innovator.
Here are five reasons on why we believe Apple stock will be worth $250 by December 2008....
appleinnovation.blogsp...
One thing that you are not accounting for is that whatever apple has sold (via AT&T or retail store), they spread that sales figures over 8 quarters, therefore 10 million iphone sales figures is a non-issue. I do appologize, but there was an article on Seeking Alpha about a month ago on this issue and it went into further details of exactly how that accounting worked and how their numbers are secured.
"The only caveat is the overall health of the retail economy worldwide."
IMHO, its going to take most of '08 for the economy to rebound. I don't think people are going to use their "government rebates" to buy an iPhone.
My first concern is for the economy in general. My second concern is for general market sentiment. Apple may be a good company with good products but this is flat out not a good time to be dumping more money into the market.
Today's market is quite risky; but the market may turn before people are feeling secure again. Monetary policy usually takes almost a year to effect the economy. Yet, the lenders will likely be effected sooner as the government throws cheap money at them. Apple is likely to continue to make new product news this year with the SDK producing a flood of software come summer and fall. The current $120 floor may well break; but come fall things could turn around. Apple's school sales and product introductions for Christmas as well as quarter announcements should propel the stock. Plus, you have the "new" U.S. President effect to stimulate the market.
Long term, the iPhone will become the largest product segment for Apple with the iPod Touch family increasing the iPod segment. Corporate penetration, starting with the phone, will grow as their programmers find out how productive they can be with X Code and Cocoa. The demo programs were produced in 2 weeks with just one or two software engineers who had not used Cocoa before then. Jobs wanted to show them how much easier it is with Apple's tools. Their excitement showed it worked.
The bottom is not in, however. The general decline of the market will sink this name even further.
Apple products...
They own the music market now. Folks want a computer and phone that plays all their music and videos (and a complete system that handles music and video extremely well, has no viruses, runs all software (not just the ugly, clunky, crash prone, virus prone Windows software). People everywhere are waking up to the fantastic advantages of Mac over windows, this is increasing by 40%. Apple makes a lot of money in this senario, and growth is better, and margins are far higher, and APple is making it on hardware, software retail, services, music and video sales, even cell phone profits from monthy bills. They are opening corporate sales and international sales. Tell me one other company who's future looks brighter, because I would like to pick up some of that stock to diversify a bit.
I believe it's up to 8% again. Many years ago they held that much
of the market and then it started to fall. I think down to 3 or 4%.
Most people LOVE the computers. I know I love mine.
I encourage anyone with more exact numbers to chime in.