Buy Apple: I Maintain My High Price Target, And Here's Why

Dec. 31, 2013 2:20 AM ETApple Inc. (AAPL)GOOG, HPQ132 Comments
Alex Cho profile picture
Alex Cho

I find it fairly interesting that investors would conclude that Apple's (NASDAQ:AAPL) growth story is somehow over. Sure, it's fun to point to statistics that support your thesis, and use arbitrary values that overwhelmingly support a conclusion. I see it time and time again, confirmation bias, and the near endless ways market participants fool themselves out of legitimate opportunities. Some even defer to logical extremes that supplant any practical logic from taking place.

Nathan Brooks calls it the end of Apple and Ashraf Eassa thinks that the price of the stock will stagnate over the years. I really have to disagree with the outlook provided by both contributors.

Comparison/Fundamental analysis

Currently, Apple probably has the best looking financial metrics when compared to peers. One could argue a growth or value case just by looking at the numbers.

Source: Yahoo! Finance

Apple's market capitalization is the highest out of the group. Google (GOOG) comes in second, because of the growth potential of search advertising. Currently Apple has 4% year-over-year quarterly revenue growth, which is lower than Google's 12% year-over-year quarterly revenue growth. However, going into 2014, Apple's revenue is expected to grow by 8%.

Currently Apple has the highest revenue amongst its peers, and Google has the highest gross margin amongst peers. However, when considering Apple generates the vast majority of its profit from hardware, and Google generates profit from services I don't think it's necessarily a fair comparison. Gross margin fell for the year, because the pricing of the Apple iPad Mini was lower than the Apple iPad diminishing margins. Going into fiscal year 2014, the low margin products should be offset with higher unit sales.

Surprisingly Apple has the highest operating margin amongst its peers. This is because Apple has limited fixed capital, and while we could argue the same for

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Alex Cho profile picture
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