Piper: Despite recent struggles, now a good time to own Apple stock
Apple has become a victim of its own success, but the company's growth rate will remain sustainable for the next four years, one prominent Wall Street analyst believes.
Gene Munster with Piper Jaffray issued a note to investors on Wednesday declaring that "now is a good time to own" AAPL stock. He said he's confident that the stock will continue its upward trajectory in the coming years, regardless of recent struggles.
"In many ways Apple is a victim of its own success in the eyes of shareholders," Munster wrote. "There are several reasons why some are concerned AAPL will not move higher, including ownership reaching maximum levels among key investors, tough growth comps over the next several quarters, and a lack of share appreciation following a significant beat in March.
"But we believe that the multiple will expand slightly as the Street gains confidence in sustainable growth of 25% or greater, new product categories, and new software announced at WWDC on 6/6 will serve as a catalyst in the future."
Among potential new product categories, Munster continues to believe that Apple will eventually enter the high-definition television set market, with its own high-end, connected TV offering direct access to iTunes content. He said Wednesday he believes Apple will launch a connected HDTV in the next 2 to 4 years, and restated his belief that the company could introduce such a product by the end of calendar year 2012 at the earliest.
As for the upcoming Worldwide Developers Conference starting on June 6, Munster believes that expectations for the event are "relatively low," because of numerous reports that Apple will not introduce new iPhone hardware as it has done in years past.
"But we believe the software features for the next version of iPhone software (iOS 5) and Mac software (OS X Lion) could exceed those low expectations, and may indicate new hardware features," Munster wrote. "additionally, there is always the 'one more thing'-factor that Apple could surprise the crowd with a new service or product."
Munster has conservatively modeled for Apple to grow 23 percent year over year in calendar year 2012. Beyond that, he expects Apple to grow its revenue in the high-20s percent range over the next four years.
While Apple's growth is projected to continue, the numbers presented by Munster are significantly less than the sky-high year over year figures Apple has posted recently. For example, in the most recent March quarter, the company's profits increased 95 percent to $5.99 billion.
But Munster said his projections in the high 20s are also "well ahead" of the long-term growth rate many investors assume for Apple. On Wall Street, the expectation is for the company's growth to be in the 15-to-20-percent range over the next four years.
Piper Jaffray has maintained its "overweight" rating for AAPL stock, as well as a price target of $554.
Gene Munster with Piper Jaffray issued a note to investors on Wednesday declaring that "now is a good time to own" AAPL stock. He said he's confident that the stock will continue its upward trajectory in the coming years, regardless of recent struggles.
"In many ways Apple is a victim of its own success in the eyes of shareholders," Munster wrote. "There are several reasons why some are concerned AAPL will not move higher, including ownership reaching maximum levels among key investors, tough growth comps over the next several quarters, and a lack of share appreciation following a significant beat in March.
"But we believe that the multiple will expand slightly as the Street gains confidence in sustainable growth of 25% or greater, new product categories, and new software announced at WWDC on 6/6 will serve as a catalyst in the future."
Among potential new product categories, Munster continues to believe that Apple will eventually enter the high-definition television set market, with its own high-end, connected TV offering direct access to iTunes content. He said Wednesday he believes Apple will launch a connected HDTV in the next 2 to 4 years, and restated his belief that the company could introduce such a product by the end of calendar year 2012 at the earliest.
As for the upcoming Worldwide Developers Conference starting on June 6, Munster believes that expectations for the event are "relatively low," because of numerous reports that Apple will not introduce new iPhone hardware as it has done in years past.
"But we believe the software features for the next version of iPhone software (iOS 5) and Mac software (OS X Lion) could exceed those low expectations, and may indicate new hardware features," Munster wrote. "additionally, there is always the 'one more thing'-factor that Apple could surprise the crowd with a new service or product."
Munster has conservatively modeled for Apple to grow 23 percent year over year in calendar year 2012. Beyond that, he expects Apple to grow its revenue in the high-20s percent range over the next four years.
While Apple's growth is projected to continue, the numbers presented by Munster are significantly less than the sky-high year over year figures Apple has posted recently. For example, in the most recent March quarter, the company's profits increased 95 percent to $5.99 billion.
But Munster said his projections in the high 20s are also "well ahead" of the long-term growth rate many investors assume for Apple. On Wall Street, the expectation is for the company's growth to be in the 15-to-20-percent range over the next four years.
Piper Jaffray has maintained its "overweight" rating for AAPL stock, as well as a price target of $554.
Comments
The uncertain factor with apple stock is, and will be in the future, Steve's health.
Steve's health is a cloud but it is mostly factored in. The fear that the world's second largest company by market cap can't grow much any more is a much bigger factor. Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.
Steve's health is a cloud but it is mostly factored in. The fear that the world's second largest company by market cap can't grow much any more is a much bigger factor. Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.
I have to think you are correct, that or Apple are victims of the best stock manipulation in history. It trades so far below where it should be as to be ridiculous.
I was going to say AAPL is like a cork held below water then I visualized the effect of letting go and decided to change the image to a hydrogen balloon held below water.
Steve's health is a cloud but it is mostly factored in. The fear that the world's second largest company by market cap can't grow much any more is a much bigger factor. Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.
Given that only 13% of the market has transitioned to smart phones, Piper's 30% yearly growth rate for the next 4 years is a laughable figure at best. Given the iPhone has been growing in the 100%-600% Y/Y rate in the previous quarters, thinking it is simply going to stop grabbing market share from feature phones is simply not a reasonable thought process.
I suspect Apple still has room to continue to grow at 50%->100% year over year for the next 3 years. This will land them with 15-25% market share in the phone world. Android users will call this "losing" since Android will have 35-50% market share.
Apple the next Magrathea
http://en.wikipedia.org/wiki/Places_...laxy#Magrathea
Can anyone explain guys what's with apple and the german stock market? Why was I reading somewhere of their presence there? It could be completely bullcrap of course, sounds like it.
I guess you don't do much investing, do you?
Many global corporations trade on stock exchanges around the world. Apple trades on the German stock market.
Likewise, many foreign corporations trade in American exchanges. For example, Sony (SNE), France Telecom (FTE) and Siemens (SI) trade on the New York Stock Exchange.
One financial instrument used to trade shares of a foreign stock is the ADR:
http://en.wikipedia.org/wiki/America...sitary_Receipt
Getting 1 share for $334 today (disclosure, I own AAPL) seems a hefty buy where as buying 10 shares at $33.40 isn't such a leap.
It costs the same either way. Plus, there are plenty of other stocks in the hundreds of dollars price range that aren't stuck like AAPL.
Damn right. P/E of 15.84. It's a steal. Load on up til $450.
I guess you don't do much investing, do you?
Many global corporations trade on stock exchanges around the world. Apple trades on the German stock market.
Likewise, many foreign corporations trade in American exchanges. For example, Sony (SNE), France Telecom (FTE) and Siemens (SI) trade on the New York Stock Exchange.
One financial instrument used to trade shares of a foreign stock is the ADR:
http://en.wikipedia.org/wiki/America...sitary_Receipt
Oh thanks very interesting reads, no I don't much investment other than in property.
As for AAPL valuation, Just wish I could buy more options. Exercised my May calls unwilling to take the loss at $340. Not quite sure why I did that, but I didn't think it could go as low as it did this week. PE of 15 is one thing... but a PEG of around 0.3 just drives me nuts.
Can anyone explain guys what's with apple and the german stock market? Why was I reading somewhere of their presence there? It could be completely bullcrap of course, sounds like it.
The only market Apple pays to have its stock officially listed is The NASDAQ Global Select Market. See the NASDAQ website for details on this market, which is limited to a roster of global leaders. However, nothing prevents a market in some other part of the world from listing Apple shares in an unofficial capacity if it can find willing buyers and sellers, the exchange thinks it can make some money on the trades and the country's securities laws permit it. A couple years back Apple withdrew from the Frankfort exchange, which was the only market besides NASDAQ where it paid to have a listing. The withdrawal had no significance for the stock price and merely cut out an unnecessary expense.
...
As for AAPL valuation, Just wish I could buy more options. Exercised my May calls unwilling to take the loss at $340. Not quite sure why I did that, but I didn't think it could go as low as it did this week. PE of 15 is one thing... but a PEG of around 0.3 just drives me nuts.
Yeah, strange. Any discussion about PEG as a useful metric can be extinguished by bringing up AAPL. For growth companies other than Apple, investors are willing to pay 1.0 to 1.5 PEG. I think Munster's observation about institutions reaching their maximum investment on AAPL has some truth to it. There just isn't anyone out there who can make a new investment in AAPL large enough to move the price (except, of course, Apple itself
Saw an ad for a Bose HDTV recently... and for the first time in nearly a decade that it seems like Gene has been claiming Apple will build a HTDV, it seems like it might actually be a possibility.
As for AAPL valuation, Just wish I could buy more options. Exercised my May calls unwilling to take the loss at $340. Not quite sure why I did that, but I didn't think it could go as low as it did this week. PE of 15 is one thing... but a PEG of around 0.3 just drives me nuts.
Interesting. What strike price did you enter at?
I'm not high-finance wiz, but wouldn't a stock split psychologically make Apple's stock feel cheaper and encourage smaller investors to buy it up, and then allow it to rise more? It's a mental glass-ceiling, isn't it? Getting 1 share for $334 today (disclosure, I own AAPL) seems a hefty buy where as buying 10 shares at $33.40 isn't such a leap. Apple doesn't give dividends, so the return for the shareholders is only in stock price - and a split doesn't cost anything, does it?
It's the same amount of equity.
Stock splits increases volatility and trading volumes, not from retail investor activity, but via fund managers and automated program buying.
The impact of retail investor trading activity is negligible. The perception of share "affordability" to Aunt Millie is irrelevant.
Moreoever, AAPL is not a particularly popular stock with retail investors. About 70% of the outstanding AAPL shares are held by institutions. It's guys like Legg Mason or Vanguard who buy AAPL.
I have to think you are correct, that or Apple are victims of the best stock manipulation in history. It trades so far below where it should be as to be ridiculous.
I was going to say AAPL is like a cork held below water then I visualized the effect of letting go and decided to change the image to a hydrogen balloon held below water.
Haven't you ever considered that not one more investor on Earth will pay more than $340 for a stock that doesn't move for months at a time and that every financial quarter brings doubt and grief to shareholders despite excellent earnings? Maybe Apple shares have gone up as far as they can and has become the new Microsoft of being mired in a narrow trading range for years as the P/E becomes compressed to about 5. Food for thought.
[...] Many global corporations trade on stock exchanges around the world. Apple trades on the German stock market. [...]
And I've heard that German law requires less transparency about who is buying and/or selling what stock in large quantities. For example (and I have only read about this as a total newbie) Porsche managed to corner the market on VW stock. They secretly bought large amounts of stock, which drove up the price. Shorters who expected the stock to fall, because they perceived it to be overpriced, paid big money to Porsche. Because Porsche simply kept accumulating VW shares, which drove the price up even more. They announced this periodically. No big deal.
After Porsche had reached 35% ownership, they kept buying and driving up the price. In secret. Nobody knew who was buying all the shares, but VW stock went from 200 to 1000 EU. It was the world's most valuable company briefly, and hugely overvalued.
When Porsche owned about 74% of all outstanding shares, they announced the fact. They squeezed the shorters to pay up in cash, then began selling their shares and placing put orders to profit from the stock's decline. They made billions and kept a majority of the shares (just under 51%), and effectively controlled VW. (Of course, VW got the last laugh and now owns Porsche.)
Just before major Apple events, Deutche Bank seems to be doing some kind of voodoo with AAPL. Not sure exactly what it is, but it causes a sudden artificial drop in AAPL's price around iPad announcements, WWDC, etc. If I were the suspicious type, I'd guess that since DB is bullish on AAPL, they want to buy. So maybe they do a deal with some other institution who is bearish and gets them to sell at a specific time on a specific day, which drops the price, and allows DB to get a good deal on AAPL.
If I were the suspicious type, I'd guess that. Just sayin'.
Here are some better explanations of the Porsche / VW story:
http://www.nytimes.com/2008/10/31/bu.../31norris.html
http://en.wikipedia.org/wiki/Volkswagen_Group
[ ... ] Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.
You nailed it. As smart as Wall Street types think they are in detecting stock trends and analyzing corporate financial reports, they are still a bunch of knee-jerk lemmings. Any random event can trigger panic selling. We've all seen that.
The flip side to the knee-jerk panic-sell group-think is the "history shows that this can't be happening" mentality. History shows that MSFT has always been the #1 stock in the tech sector, so they focus on Microsoft as the sector leader. And, historically, all others in tech are either established and slow-moving (e.g. Intel, HP, Oracle) or short term flashes-in-the-pan (e.g. Yahoo, the dot-com bubble startups, etc.)
So AAPL is being held down because the lemmings expect someone (maybe Google? maybe Microsoft? maybe Amazon?) to step on Apple and shut down their enormous growth. And because the stock historians look back and see that Microsoft has huge market share in the corporate legacy pee-cee realm. Microsoft is "too big to die." Apple isn't, or so they think.
Analysts can only look backward and project historical trends into the future. That's why Apple's growth is so confusing to Wall Street. Apple didn't sell iPhones or iPads 10 and 20 years ago. The stock historians have no data to extrapolate. The knee-jerk lemmings are afraid that Apple will make a big mistake and AAPL will come crashing down. They're all wrong.
It's the same amount of equity.
Stock splits increases volatility and trading volumes, not from retail investor activity, but via fund managers and automated program buying.
The impact of retail investor trading activity is negligible. The perception of share "affordability" to Aunt Millie is irrelevant.
Moreoever, AAPL is not a particularly popular stock with retail investors. About 70% of the outstanding AAPL shares are held by institutions. It's guys like Legg Mason or Vanguard who buy AAPL.
Just want to share some analysis I did about major holders. On this topic. Below Shows increase or decrease by major holders in 1Q 2011
Holder\tInc/(Dec) Q1
FMR LLC\t-2,385,289
VANGUARD GROUP, INC. (THE)\t1,028,523
STATE STREET CORPORATION\t1,525,630
BlackRock Institutional Trust Company, N.A.\t57,680
PRICE (T.ROWE) ASSOCIATES INC\t186,639
Invesco Ltd.\t431,860
JP MORGAN CHASE & COMPANY\t-1,416,225
NORTHERN TRUST CORPORATION\t-422,439
Bank of New York Mellon Corporation\t751,598
FMR LLC\t-2,385,289
VANGUARD GROUP, INC. (THE)\t1,028,523
STATE STREET CORPORATION\t1,525,630
BlackRock Institutional Trust Company, N.A.\t57,680
PRICE (T.ROWE) ASSOCIATES INC\t186,639
Invesco Ltd.\t431,860
JP MORGAN CHASE & COMPANY\t-1,416,225
NORTHERN TRUST CORPORATION\t-422,439
Bank of New York Mellon Corporation\t751,598
The knee-jerk lemmings are afraid that Apple will make a big mistake and AAPL will come crashing down. They're all wrong.
What role do you think the dependence on Jobs as figurehead and visionary leader still plays in the psyche of Wall Street?