Originally Posted by drblank
I just would rather invest in Apple when the P/E is at a lower point at this time in their situation since they aren't in high growth mode. .........
I also told you I wanted to WAIT to make a judgement until AFTER WWDC. WWDC is next week.
You are going off of hindsight, and hindsight is 20/20.
You ran no analysis of your own or are you just believing what an analyst says as long as it makes you feel your stock is going to go up. I know that feeling well. What's the concesus with Wall Sreet? At the time we discussed it, it wasn't that great and I wasn't that confident from my own analysis at the time which I look at. If I don't feel confident, and then I look at what Wall Streett says and it's close to what I think BEFORE looking at their evaluations! then I'm cautious.
Apple's PE is already low.
The market cap is $545B. Minus the $150B in cash and the market cap sans cash is $459B. Estimated EPS is $42. That gives it a PE of 11. And when you said it was expensive at $570 a share the PE was below 10.
Google's PE ratio is 30. Last quarter Google grew GAAP EPS only 2%. Apple grew GAAP EPS 12% last quarter.
You said to wait till after WWDC. Problem is since you waited you missed out on the run from $570 to $644. I'm not relying on hindsight. I said Apple was a buy when it was $570 one month ago. That's not hindsight. That's a good prediction. And if you read my post history you will see that I suggested buying Apple shares at the $400-$500 level.
So you depend on Wall Street analyst to make buy decisions? That my friend is a bad idea. When the stock was $400 last year half of Wall Street was saying to sell. The price targets were at $500. Listening to them would only lead to losing a ton of money. Now Wall Street is confident. But if you listened to them you would have missed the rise from $400-$644. A little late to the party IMO. I bought shares in the $400 and $500 level and ignored Wall street. When Wall Street was saying to sell they were probably buying at $400.
You want to see my analysis why I think Apple will reach $750 this year?
1. The last two quarters Apple has shown 10-15% EPS growth. The previous 4 quarters were negative growth. They have turned the corner and so has the stock.
2. I'm expecting a PE ratio of 17. The average PE ratio of the S&P500 is 19.20. Apple is best in breed. Even at a discount PE of 17 that will give a stock price of $750 ( $44 EPS x 17).
3. Apple is a cash generating machine. They generate $45B in free cash flows a year. In 10 years they will be able to buyback 50% of their shares with a conservative buyback of $25B a year. That means if all things stay equal they will be increasing EPS by 100%. If profits stay flat their EPS per share would be $88. Even at a conservative PE of 12 that gives a price per share of $1050.
4. iPhone6 will dominate. The only reason to buy an Android phone over an iPhone has been screen size. That advantage will disappear with iPhone6. This will be a huge upgrade cycle as many 4, 4S, and 5 users will finally upgrade. I'm expecting 65-70 Million iPhones sold in the Dec quarter.
5. New product category. Cook made it clear that 2014 would be the year of new product categories. This will lead to profit growth and a stronger ecosystem.
6. Once Apple buys back 50% of its shares (the current buyback already will take out 15-20% of the shares) Apple can easily offer a 4-5% dividend. Free cash flows is $45B with only 500,000,000 outstanding shares.
7. Beats acquistion is a positive. They made key hires in the fashion world, medical field, and media/entertainment field. Something really big is going down this year and next.
Edited by sog35 - 5/31/14 at 9:01am