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RBC ups Apple price target to $100, sees 'iPhone 6' & new product categories driving growth

post #1 of 21
Thread Starter 
Following this week's stock split, RBC Capital Markets sees shares of Apple reaching near-record highs in the second half of 2014, based on the strength of the expected "iPhone 6," as well as hotly anticipated new product categories from the company.

9040-497-iPhone-6-iPhone-6c-010-l.png
"iPhone 6" and "iPhone 6c" concepts by Martin Hajek.


Analyst Amit Daryanani issued a note to investors on Thursday, a copy of which was provided to AppleInsider, revealing his new price target of $100 per share of AAPL. That's up from his previous prediction of $96 per share, which itself was $675 prior to the company's 7-for-1 split that took effect on Monday.

RBC's new price target would put Apple at a near-all-time-high, as the company's previous record is now $100.30 in post-split trading.

Daryanani said his new target of $100 reflects increased confidence in the upcoming second half of Apple's calendar 2014. In particular, he believes that the company's expected "iPhone 6" could prove to be even more profitable with a higher-end model.

Given rumors of two screen sizes of 4.7 inches and 5.5 inches, Daryanani believes that Apple could sell a jumbo-sized iPhone at a starting price of $299 on contract. He also believes that improved iPads will arrive this fall, as Apple has done in recent years, helping to boost hardware sales.

Daryanani is also excited about new product categories, which Apple has pledged to enter into in 2014. In particular, the analyst believes that Apple will release its widely rumored so-called "iWatch" later this year.

He sees an "iWatch" making Apple users more integrated into the company's ecosystem by acting as a health monitoring system, and also increasing communication with other Apple devices.

As for a "wild card" prediction, Daryanani said he doesn't expect Apple to release a full-fledged television set this year, but he believes recent reports indicating that Apple is moving its ad-creation in-house hint that the company could be looking to build its own HDTV in the long term.

After the split took effect on Monday, shares of AAPL opened at $92.69. Overall, they're up slightly for the week through Wednesday trading, and were up again Thursday in pre-market NASDAQ trading to about $94.
post #2 of 21
5% increase from here? Too conservative

BTW, hope TIm is buying the stock hand over fist before goes up anymore

Windows survivor - after a long, epic and painful struggle. Very long AAPL

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Windows survivor - after a long, epic and painful struggle. Very long AAPL

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post #3 of 21

LOL. These 5% estimates are ridiculous.

 

If you are giving it a BUY rating and only expecting it to go up 5% in the next 12 months is stupidity.  If you think its only going up 5% in 12 months it should have a hold rating.  If you give it a buy rating your target needs to be at least 10%-15%

post #4 of 21
Quote:
Originally Posted by sog35 View Post

LOL. These 5% estimates are ridiculous.

If you are giving it a BUY rating and only expecting it to go up 5% in the next 12 months is stupidity.  If you think its only going up 5% in 12 months it should have a hold rating.  If you give it a buy rating your target needs to be at least 10%-15%

Not necessarily. It depends on how well you think the market might do.
post #5 of 21

The analyst community is showing its ignorance when analysts suggest that a pre-spilt price of $705 would take Apple back to its previous high.  At the time Apple hit $705 in Sept of 2012, there were about 945 million shares outstanding.  That means, at $705 * 945 million shares, the market valued Apple at $660 billion, its highest valuation in its history.  To get back to that same valuation, with the current share count at about 861 million, Apple shares would need to reach $770, or $110 post-split.  So $110 is the new $705.  How are analysts missing this?  If Apple had instead done a reverse split, say 1:2, to take the shares over $1000, I suppose these same analysts would have written 'Apple Overnight Reaches New Highs!'  

I have enough money to last the rest of my life. Unless I buy something. - Jackie Mason
Never own anything that poops. - RadarTheKat
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I have enough money to last the rest of my life. Unless I buy something. - Jackie Mason
Never own anything that poops. - RadarTheKat
Reply
post #6 of 21

Going to be fun watching the price whoosh right by this target. There's a lot driven by fundamentals but clearly a lot of valuation is due to sentiment and speculation. How else to arrive at 563 P/E ratio for Amazon with no profits and 16 for Apple with gobs of it?

 

Apple's split and dividends and buybacks are, on the one hand, simple machinations to goose the stock price but on the other hand makes sense from company value standpoint. It's a good use of cash. That it will influence the price of the stock positively is welcome for anyone who cares about that but not at the detriment to the value of the company or its abilities to keep churning out amazing products.

 

-An Apple customer and shareholder

 

*And indeed my comments are a lot of sentiment and speculation too! :D 

post #7 of 21
Quote:
Originally Posted by RadarTheKat View Post
 

The analyst community is showing its ignorance when analysts suggest that a pre-spilt price of $705 would take Apple back to its previous high.  At the time Apple hit $705 in Sept of 2012, there were about 945 million shares outstanding.  That means, at $705 * 945 million shares, the market valued Apple at $660 billion, its highest valuation in its history.  To get back to that same valuation, with the current share count at about 861 million, Apple shares would need to reach $770, or $110 post-split.  So $110 is the new $705.  How are analysts missing this?  If Apple had instead done a reverse split, say 1:2, to take the shares over $1000, I suppose these same analysts would have written 'Apple Overnight Reaches New Highs!'  

That makes sense.  The analysts aren't doing their jobs properly.  I guess my new reset number is $110.  I think that's going to take a little longer for Apple to reach.  I think only super-high iPhone sales and a wearable device near the end of the year are going to get it that high.

post #8 of 21
Quote:
Originally Posted by anantksundaram View Post


Not necessarily. It depends on how well you think the market might do.

 

No one in their right mind would be happy get 5% return from stocks that are VERY RISKY. 

You need at least 10-15% estimated return to even consider buying a stock unless you are buying purely for dividend

post #9 of 21
Quote:
Originally Posted by RadarTheKat View Post
 

The analyst community is showing its ignorance when analysts suggest that a pre-spilt price of $705 would take Apple back to its previous high.  At the time Apple hit $705 in Sept of 2012, there were about 945 million shares outstanding.  That means, at $705 * 945 million shares, the market valued Apple at $660 billion, its highest valuation in its history.  To get back to that same valuation, with the current share count at about 861 million, Apple shares would need to reach $770, or $110 post-split.  So $110 is the new $705.  How are analysts missing this?  If Apple had instead done a reverse split, say 1:2, to take the shares over $1000, I suppose these same analysts would have written 'Apple Overnight Reaches New Highs!'  

 

It's not the analysts showing ignorance.  They just set their price targets- and those targets take into account the number of shares outstanding.  They value it at $100 (ie $700 pre split).  If Apple had the same shares outstanding as they did in 2012, their number would be lower.

 

It is the author stating Apple will be at an all time high.  You are right that Apple's market cap will still be quite a bit lower than in Sept of 2012- but the author didn't specify Apple's market cap or valuation will be at an all time high... he just said that 'Apple' would be at an all time high.   It sounds better for Apple that way and it is not technically incorrect, although it would be more clear if he stated "Apple's share price" would be at an all time high.  If you buy AAPL the number of shares outstanding or overall valuation of the company probably mean less to you than "I bought my shares at $700, now I can sell them for $705"  It is an all time high Apple share price.

post #10 of 21
Quote:
Originally Posted by RadarTheKat View Post
 

The analyst community is showing its ignorance when analysts suggest that a pre-spilt price of $705 would take Apple back to its previous high.  At the time Apple hit $705 in Sept of 2012, there were about 945 million shares outstanding.  That means, at $705 * 945 million shares, the market valued Apple at $660 billion, its highest valuation in its history.  To get back to that same valuation, with the current share count at about 861 million, Apple shares would need to reach $770, or $110 post-split.  So $110 is the new $705.  How are analysts missing this?  If Apple had instead done a reverse split, say 1:2, to take the shares over $1000, I suppose these same analysts would have written 'Apple Overnight Reaches New Highs!'  

 

Don't forget these are 12 month targets and Apple has another $45B of buyback to be completed by Sept2015.  So you can easily lop off another 8% of shares. 

post #11 of 21
Quote:
Originally Posted by sog35 View Post

Quote:
Originally Posted by anantksundaram View Post

Not necessarily. It depends on how well you think the market might do.

No one in their right mind would be happy get 5% return from stocks that are VERY RISKY. 
You need at least 10-15% estimated return to even consider buying a stock unless you are buying purely for dividend

Apple is by no means 'very risky.' Indeed, look at its ß -- it's less than than of the market.
post #12 of 21
Quote:
Originally Posted by Frood View Post
 

 

It's not the analysts showing ignorance.  They just set their price targets- and those targets take into account the number of shares outstanding.  They value it at $100 (ie $700 post split).  If Apple had the same shares outstanding in 2012, their number would be lower.

 

It is the author stating Apple will be at an all time high.  You are right that Apple's market cap will still be quite a bit lower than in Sept of 2012- but the author didn't specify Apple's market cap or valuation will be at an all time high... he just said that 'Apple' would be at an all time high.   It sounds better for Apple that way and it is not technically incorrect, although it would be more clear if he stated "Apple's share price" would be at an all time high.  If you buy AAPL the number of shares outstanding or overall valuation of the company probably mean less to you than "I bought my shares at $700, now I can sell them for $705"  It is an all time high Apple share price.

 

I'm not balking at their price targets.  I'm balking at the statement, some of them make, that suggest $100.30 ($705 pre-split) represents Apple's previous high water mark.  With buybacks ongoing, all past share prices become arbitrary numbers that need to be adjusted against what they implied for overall value (market cap) before being compared to current or potential future prices.  It's okay for a shareholder to view $705 as his get-back-to-even price, because shareholders typically are talking to themselves inside their own heads.  But I think its irresponsible for analysts and the press to not bring forward this crucial valuation information.  By omission, they present a view of the company's value that is not accurate. 

I have enough money to last the rest of my life. Unless I buy something. - Jackie Mason
Never own anything that poops. - RadarTheKat
Reply
I have enough money to last the rest of my life. Unless I buy something. - Jackie Mason
Never own anything that poops. - RadarTheKat
Reply
post #13 of 21
Quote:
Originally Posted by anantksundaram View Post


Apple is by no means 'very risky.' Indeed, look at its ß -- it's less than than of the market.

 

Tell that to someone who bought it at $600 and saw it drop to $385 last year

post #14 of 21
Quote:
Originally Posted by sog35 View Post

Tell that to someone who bought it at $600 and saw it drop to $385 last year

Would that "someone" be you?

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #15 of 21
Quote:
Originally Posted by sog35 View Post

Tell that to someone who bought it at $600 and saw it drop to $385 last year
Not for someone who is in for the long term and believe in where the company is going. Their stocks would be worth the equivalent of $651 today.
post #16 of 21
Quote:
Originally Posted by sog35 View Post
 
Quote:
Originally Posted by anantksundaram View Post


Apple is by no means 'very risky.' Indeed, look at its ß -- it's less than than of the market.

 

Tell that to someone who bought it at $600 and saw it drop to $385 last year

1) I am not sure you understand where the ß comes from or what it means in terms of the type of risk that it measures. (Hint: it's not volatility.)

 

2) Apple had declining revenues and profits, and the market was worried about its growth prospects. We should not have been surprised that the price fell.

post #17 of 21
Quote:
Originally Posted by SpamSandwich View Post


Would that "someone" be you?

 

nope.

post #18 of 21
Apparently, Jimmy Lin has posted full on pictures of the iPhone 6 on the web now:

http://www.scmp.com/news/china-insider/article/1530800/taiwanese-celebrity-jimmy-lin-posts-leaked-iphone-6-images


Edited by SpamSandwich - 6/12/14 at 11:18am

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #19 of 21
Quote:
Originally Posted by RadarTheKat View Post
 

The analyst community is showing its ignorance when analysts suggest that a pre-spilt price of $705 would take Apple back to its previous high.  At the time Apple hit $705 in Sept of 2012, there were about 945 million shares outstanding.  That means, at $705 * 945 million shares, the market valued Apple at $660 billion, its highest valuation in its history.  To get back to that same valuation, with the current share count at about 861 million, Apple shares would need to reach $770, or $110 post-split.  So $110 is the new $705.  How are analysts missing this?  If Apple had instead done a reverse split, say 1:2, to take the shares over $1000, I suppose these same analysts would have written 'Apple Overnight Reaches New Highs!'

You're showing your ignorance on how analysts value stock prices. Almost all will use some form of a DCF model that gets a total enterprise value, then backs into shareholder value. Then, it's a simple division of shares outstanding to get to their price target- NOT the other way around. You're vastly underestimating the modeling ability of these analysts...

post #20 of 21
Quote:
Originally Posted by RadarTheKat View Post
 

 

I'm not balking at their price targets.  I'm balking at the statement, some of them make, that suggest $100.30 ($705 pre-split) represents Apple's previous high water mark.  With buybacks ongoing, all past share prices become arbitrary numbers that need to be adjusted against what they implied for overall value (market cap) before being compared to current or potential future prices.  It's okay for a shareholder to view $705 as his get-back-to-even price, because shareholders typically are talking to themselves inside their own heads.  But I think its irresponsible for analysts and the press to not bring forward this crucial valuation information.  By omission, they present a view of the company's value that is not accurate. 

 

It is not the analysts saying the $100 price point is a high water mark, it is the authors writing the article for AI (and even they didn't say it was a high water mark).

 

Analyst valuations are almost always represented in the form on the day of their targets.  So pre-split they would indicate their valuation was $700.... even if they knew the following week there was going to be a 7 to 1 split and in a year the target would therefore be $100.

 

Splits and buybacks should not affect the valuation in and of themselves- only actual performance and speculation on the net present value of future expected earnings should drive share valuation.

 

Most people 'get' stock splits... If it is worth $700 per share and they release 7-to-1 shares, the new shares are worth $100.  No change in market cap, but a change in price per share.

 

Buybacks work in a similar manner.  If a company had $1,000,000,000 in the bank, and had 1,000,000 shares outstanding (and for simplicity's sake to avoid speculation factors it had no products or assets)- it would be valued at $1000 per share.  Lets say you bought 1000 shares for $100,000.  If they executed a buyback to buy 50% of their shares...  They would buy 500,000 shares.  This would cost them $500,000,000.  There would now be 500,000 shares outstanding (of which you still own 1000), and since they still have $500,000,000 in the bank, they would be worth $1000 per share.  A buyback should not affect share price or market cap.  Investors generally like a buyback because it allows their ROI to more accurately be tied to the companies actual performance, rather than tied to whatever returns the cash sitting in the bank generates.  If investors wanted that- they could just throw money in a bank instead and have better access to it.

 

So all you need to do when an analyst sets his or her price target is look at where the stock is on *that* day, and what the target is.  It is the simplest way.  So pre-split if Apple was trading at $620 and an analyst gave a projection of $700 a year out even though he knew a split was due the following week, its still a pretty easy thing to grasp that he expects Apple's share price to rise by over 10% that year.  If he took the split dates into account it would be chaos and/or require a boatload of explanations and safe harbor statements every time an analyst made a projection.  'Apple today trading at $620 and analysts predict the share price one year from now will be $100' would not be a better method.... even if they did add a statement reflecting the $100 target was in 'anticipation of a rumored stock split by Apple sometime in the future which may or may not happen in the next year.'


Edited by Frood - 6/12/14 at 11:09am
post #21 of 21
This same discussion happened in 1995 when analysts, the nightly news and nearly all tech mags were playing taps, predicting the failure of all things Apple. Bankruptcy and asset distribution were the company's only viable options. The analysts are always conservative in their predictions - especially when it comes to the world's largest corporations. And if you believe a 5% predicted ROI warrants a buy call, well then, you really are better off investing in group participation plans - mutual funds and the like. The stock market is a long term investment, you don't buy and sell based on fear of losing your investment, you buy low sell high (which is almost certainly akin to the number of years you hold your initial investment). Apple is not a high risk company - it's the most liquid giant corp out there, with cash reserves and units sold both increasing steadily (albeit sometimes slowly). It's still the company, everyone else is compared to, owning, creating and improving on revolutionary techs that have become industry standards. Apple stock warrants a buy call based on all those things. But that would be a disservice to Apple. Not content to rest on it's laurels, (in this case previous product launches), Apple warrants a buy call based solely on it's financial statements. I truly believe that prices will reach $125 in 2015, $135 in the election year, and be at or above $200 a share by year's end 2020. Why? Because just like in 1995 I think Apple is undervalued - yes, even at $700 a share. It's a solid buy with an expectation of a 22% averaged return over the next 5 years.
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