Forecasting $590 per Share Price Target for Apple [View article]
More than 50% of Apple's revenue is now generated from sources outside the US. I do expect the US economy to rebound. But Apple is now a global enterprise with strong growth potential in China, Brazil, India and other large and emerging consumer markets.
Apple's retail stores and product unit sales are performing well in the EU and China. The global market for the Apple iPad hasn't even been defined let alone tapped.
Obviously the economic challenges in the US have an impact on domestic product sales and of course on the share price. As the economy improves so will Apple's domestic sales performance.
Please remember the Verizon iPhone deal is only about 4 months old and that deal alone was a big catalyst for 155% growth in iPhone unit sales in the US market in the March quarter.
Forecasting $590 per Share Price Target for Apple [View article]
By offering iCloud at no cost, reducing the retail cost of OS X and OS X Server Apple is signaling an emphasis on device sales with the software and services provided as an important "value added" for consumers.
I don't include in my forecasts the impact of services that have yet to become available. On iOS 5, I see the advancements and enhanced features as part and parcel of the devices that will run the new OS.
I'm much more intrigued by the revenue and earnings potential from distribution fees sourced from the various iTunes stores than any revenue that might be generated from other services.
Forecasting $590 per Share Price Target for Apple [View article]
Microsoft remains a highly successful company but a company living under consent decrees and regulatory oversight in the US and EU due to the company's Windows monopoly.
In the first six months of this fiscal year 60% of Apple's revenue was derived from products that did not exist in the market four years ago. There's plenty of growth ahead for the maker of Macs, iPods and iPads. Even the Mac has outperformed the global PC industry for 20 consecutive quarters.
Apple's retail stores are often overlooked and in the September quarter the stores alone will sell over 1 million Macintosh computers. Last December quarter the retail margin on products sold through the stores exceeded $1 billion.
Apple's retail store presence is continuing to expand especially in previously under served markets.
Last quarter iPhone unit sales rose 155% due to the Verizon deal which is now only about four months old. The global market for the Apple iPad can not even be determined at this point in time.
Apple has already surpassed Microsoft in revenue and earnings and will reach in this fiscal year $112 billion in revenue and $27.50 in earnings per share. This will be followed by the company's first $40 billion revenue quarter in FQ1 2012.
Apple will maintain the 80% eps growth achieved in the first six months of this fiscal year during the remainder of the fiscal year.
Apple continues to grow revenue and earnings at a frenetic pace and strong revenue and earnings growth will continue for the next several quarters.
Forecasting $590 per Share Price Target for Apple [View article]
Andy:
Thank you for your kind words. I was intrigued by your latest post and look forward to reading the continuing analysis. Your points on misuse of price-earnings multiples were a pleasure to read.
The Apple Finance Board Price Target Index - June 2011 Edition [View article]
Just a brief disclosure: I am the long-time moderator of TMO's Apple Finance Board under the "DawnTreader" moniker. My numbers are included in the article above.
The Apple Finance Board Price Target Index - June 2011 Edition [View article]
Posting price forecasts in the midst of a challenging market environment has inherent risks. But short-term movements in the overall market change nothing about Apple's fundamental strengths and the prospects for continued strong revenue and earnings growth.
As the market begins to signal growth in the economy AAPL will exaggerate the market's move to the upside as this company has done several times before.
This is a high beta stock that will reward shareholders for patience and fortitude.
Forecasting $590 per Share Price Target for Apple [View article]
There are a number of factors impacting Apple's share price performance in the short-term that can be subjectively addressed. These include the overall market conditions and the stock market's role as a fairly accurate leading economic indicator.
The market is currently signaling slow growth and I expect an overall move higher as economic conditions gradually improve. Apple is a high beta stock and tends to exaggerate the broader market's movements both up and down. I consider current market sentiment symptomatic of investor frustration and sentiment will change as demand for equities improves.
Forecasting $590 per Share Price Target for Apple [View article]
Andy Zaky is a fellow member of the Apple Finance Board and I'm well acquainted with his work. His AAPL price target numbers are included in an index of estimates from AFB members I published on my blog yesterday. Another independent AAPL analyst I hold in high regard is Daniel Tello. Daniel is a Seeking Alpha member and I'd like to see him become a contributor as well
On Andy's points: Predicting Apple's quarterly earnings is a big part of my analysis and my analysis is influenced by recent quarterly performances and current data relating to unit sales trends.
Price-earnings multiples are often misapplied. In my view they are valid in analysis only when comparing enterprises in the same or similar industries and when evaluating an enterprise's past valuation patterns.
I read the arguments all day that Apple should be valued at some lofty share price because Netflix or Amazon, for example, have much higher multiples in the market. The arguments don't hold up and never will hold up.
Please note in my numbers I am not arguing that Apple will reach a p/e valuation greater than what's been awarded by the market within the past 12 months. I expect a practical compression of the multiple (considering the rising cash balances).
The graphs and table data in this article were used not to support an argument that Apple's price-earnings multiple will rise significantly above valuations awarded within the past twelve months but to support my view that the current multiples have little room to contract as revenue and earnings continue to rise at impressive rates.
Forecasting $590 per Share Price Target for Apple [View article]
There are many variables involved in any kind of forecast and investors need information to make the best decisions possible in the same way many of us watch or listen to news reports for the 5-day weather forecast. It's much better to be prepared for future events than it is to confront the unexpected and deal with the outcomes only after the fact.
In the case of Apple, historical valuations and current performance metrics are among the resources available to forecast future share price performance. Apple is currently trading significantly below a long-established valuation range while revenue and earnings growth have accelerated dramatically over the most recent six-month period. As I posted last week, I expect current fiscal year revenue of $112 billion and eps for the year of $27.50.
Even if today's low valuation relative to earnings remains steady well into the fall, the shares will be trading at or above $425 in early November based on reported earnings growth alone.
Forecasting $590 per Share Price Target for Apple [View article]
I don't expect gold to be at $4,000 by next June nor gas at $10 per gallon in 12 months. But I do expect Apple to reach $590 per share within that timeframe.
Forecasting $590 per Share Price Target for Apple [View article]
In my view Tim Cook is much different than Steve Ballmer. I've listened to Tim on each of the quarterly conference calls with analysts for the past few years and I'm impressed not only with working knowledge of all aspects of Apple, but also with his passion for the company. While no one can replace Steve Jobs, under Tim Cook's stewardship the company is in good hands.
Forecasting $590 per Share Price Target for Apple [View article]
Apple's decision to offer Mac OS X, 10.7 (Lion) at $29, the announced reduction in the price of OS X Server and the transition of subscription-based MobileMe to a suite of free services under the iCloud moniker is signaling the company is deemphasizing constituent services revenue outside of the various iTunes stores in favor of device unit sales.
Again, 60% of Apple's revenue in the March quarter was sourced from products introduced within the past four years. The iPad's market has yet to be defined and there are regions (particularly China, India and much of South America) that remain virtually untapped for the iPhone.
My share price target anticipates moderating revenue and earnings growth in FY2012 and a continued compression of the price-earnings multiple when cash is removed from the valuation.
Forecasting $590 per Share Price Target for Apple [View article]
In my view it is time for a stock split. The perception of "expensive" based on the nominal share price is a factor in the appeal of the stock among retail investors.
Forecasting $590 per Share Price Target for Apple [View article]
Time will tell whether or not my forecasts are accurate. In the March quarter over 60% of Apple's revenue was derived from two products not available in the market four year prior and for both the iPhone and the iPad strong unit sales will be sustained for the next several quarters. For the iPad in particular the global market for the product hasn't even been defined.
Windows 8 is irrelevant to Apple's success. Microsoft's biggest competitor isn't Apple, it's Google. Apple is primarily a device maker and sales in each of the company's major product lines with the exception of the sales of specific-use digital music players (the iPod) are continuing to rise with prospects for continued strong unit sales gains.
One of the factors that differentiates Apple from competing device makers is the influence of the company's global chain of retail stores. In the December quarter the retail margin on store sales alone surpassed $1 billion. New stores continue to be opened in previously under served markets.
The market for Android handsets and the iPhone only partially overlap. Apple maintains pricing control on devices and Android handsets sales are predictably price sensitive due to the number of competing handset makers. It's not an issue of how many devices are sold, but an issue of how many devices are sold are margins that benefit shareholders.
Forecasting $590 per Share Price Target for Apple [View article]
Apple's retail stores and product unit sales are performing well in the EU and China. The global market for the Apple iPad hasn't even been defined let alone tapped.
Obviously the economic challenges in the US have an impact on domestic product sales and of course on the share price. As the economy improves so will Apple's domestic sales performance.
Please remember the Verizon iPhone deal is only about 4 months old and that deal alone was a big catalyst for 155% growth in iPhone unit sales in the US market in the March quarter.
Forecasting $590 per Share Price Target for Apple [View article]
I don't include in my forecasts the impact of services that have yet to become available. On iOS 5, I see the advancements and enhanced features as part and parcel of the devices that will run the new OS.
I'm much more intrigued by the revenue and earnings potential from distribution fees sourced from the various iTunes stores than any revenue that might be generated from other services.
Forecasting $590 per Share Price Target for Apple [View article]
In the first six months of this fiscal year 60% of Apple's revenue was derived from products that did not exist in the market four years ago. There's plenty of growth ahead for the maker of Macs, iPods and iPads. Even the Mac has outperformed the global PC industry for 20 consecutive quarters.
Apple's retail stores are often overlooked and in the September quarter the stores alone will sell over 1 million Macintosh computers. Last December quarter the retail margin on products sold through the stores exceeded $1 billion.
Apple's retail store presence is continuing to expand especially in previously under served markets.
Last quarter iPhone unit sales rose 155% due to the Verizon deal which is now only about four months old. The global market for the Apple iPad can not even be determined at this point in time.
Apple has already surpassed Microsoft in revenue and earnings and will reach in this fiscal year $112 billion in revenue and $27.50 in earnings per share. This will be followed by the company's first $40 billion revenue quarter in FQ1 2012.
Apple will maintain the 80% eps growth achieved in the first six months of this fiscal year during the remainder of the fiscal year.
Apple continues to grow revenue and earnings at a frenetic pace and strong revenue and earnings growth will continue for the next several quarters.
Forecasting $590 per Share Price Target for Apple [View article]
Thank you for your kind words. I was intrigued by your latest post and look forward to reading the continuing analysis. Your points on misuse of price-earnings multiples were a pleasure to read.
The Apple Finance Board Price Target Index - June 2011 Edition [View article]
The Apple Finance Board Price Target Index - June 2011 Edition [View article]
The Apple Finance Board Price Target Index - June 2011 Edition [View article]
As the market begins to signal growth in the economy AAPL will exaggerate the market's move to the upside as this company has done several times before.
This is a high beta stock that will reward shareholders for patience and fortitude.
Forecasting $590 per Share Price Target for Apple [View article]
The market is currently signaling slow growth and I expect an overall move higher as economic conditions gradually improve. Apple is a high beta stock and tends to exaggerate the broader market's movements both up and down. I consider current market sentiment symptomatic of investor frustration and sentiment will change as demand for equities improves.
Forecasting $590 per Share Price Target for Apple [View article]
On Andy's points: Predicting Apple's quarterly earnings is a big part of my analysis and my analysis is influenced by recent quarterly performances and current data relating to unit sales trends.
Price-earnings multiples are often misapplied. In my view they are valid in analysis only when comparing enterprises in the same or similar industries and when evaluating an enterprise's past valuation patterns.
I read the arguments all day that Apple should be valued at some lofty share price because Netflix or Amazon, for example, have much higher multiples in the market. The arguments don't hold up and never will hold up.
Please note in my numbers I am not arguing that Apple will reach a p/e valuation greater than what's been awarded by the market within the past 12 months. I expect a practical compression of the multiple (considering the rising cash balances).
The graphs and table data in this article were used not to support an argument that Apple's price-earnings multiple will rise significantly above valuations awarded within the past twelve months but to support my view that the current multiples have little room to contract as revenue and earnings continue to rise at impressive rates.
Forecasting $590 per Share Price Target for Apple [View article]
In the case of Apple, historical valuations and current performance metrics are among the resources available to forecast future share price performance. Apple is currently trading significantly below a long-established valuation range while revenue and earnings growth have accelerated dramatically over the most recent six-month period. As I posted last week, I expect current fiscal year revenue of $112 billion and eps for the year of $27.50.
Even if today's low valuation relative to earnings remains steady well into the fall, the shares will be trading at or above $425 in early November based on reported earnings growth alone.
Forecasting $590 per Share Price Target for Apple [View article]
Forecasting $590 per Share Price Target for Apple [View article]
Forecasting $590 per Share Price Target for Apple [View article]
Again, 60% of Apple's revenue in the March quarter was sourced from products introduced within the past four years. The iPad's market has yet to be defined and there are regions (particularly China, India and much of South America) that remain virtually untapped for the iPhone.
My share price target anticipates moderating revenue and earnings growth in FY2012 and a continued compression of the price-earnings multiple when cash is removed from the valuation.
Forecasting $590 per Share Price Target for Apple [View article]
Forecasting $590 per Share Price Target for Apple [View article]
Windows 8 is irrelevant to Apple's success. Microsoft's biggest competitor isn't Apple, it's Google. Apple is primarily a device maker and sales in each of the company's major product lines with the exception of the sales of specific-use digital music players (the iPod) are continuing to rise with prospects for continued strong unit sales gains.
One of the factors that differentiates Apple from competing device makers is the influence of the company's global chain of retail stores. In the December quarter the retail margin on store sales alone surpassed $1 billion. New stores continue to be opened in previously under served markets.
The market for Android handsets and the iPhone only partially overlap. Apple maintains pricing control on devices and Android handsets sales are predictably price sensitive due to the number of competing handset makers. It's not an issue of how many devices are sold, but an issue of how many devices are sold are margins that benefit shareholders.