PJ ups Apple target to $103, expects split soon
Based on this week's announcements at Macworld and expectations for continued market share gains for both Mac and iPod over the next two years, research and investment firm PiperJaffray today raised its target price on shares of Apple Computer from $80 to $103.
Although there has been growing chatter that Apple is becoming a new representation of an "Internet bubble stock," analyst Gene Munster begs to differ. "We believe this label is unfair," the analyst wrote in a research note released to clients on Friday morning.
The analyst believes 2006 is poised to be the year of both iPod growth and, more importantly, Mac market share gains, which will significantly drive earnings upward.
In addition to new iPods and Intel-based Macs, the Munster expects Apple to look to new product categories by year's end, possibly including mobile phones, other consumer electronics entertainment devices.
Looking beyond this year, the analyst sees the Apple story continuing to gain momentum in 2007, as the company is addressing the fastest growing market segments that touch the digital consumer.
"Given Apple's current trajectory, legitimate competition in these markets in 2007 is unlikely," he said. "While seemingly aggressive, we expect Apple can outperform the competition for multiple years, assuming the current pace of innovation continues."
While not necessarily a catalyst for Apple's business, PiperJaffray said another Apple stock split should deliver a mild positive for Apple shares. The firm notes that Apple shares last split in the $80 range, and says it expects a 2-for-1 split will be announced by Apple soon.
PiperJaffray maintains an "Outperform" rating on Apple shares.
Although there has been growing chatter that Apple is becoming a new representation of an "Internet bubble stock," analyst Gene Munster begs to differ. "We believe this label is unfair," the analyst wrote in a research note released to clients on Friday morning.
The analyst believes 2006 is poised to be the year of both iPod growth and, more importantly, Mac market share gains, which will significantly drive earnings upward.
In addition to new iPods and Intel-based Macs, the Munster expects Apple to look to new product categories by year's end, possibly including mobile phones, other consumer electronics entertainment devices.
Looking beyond this year, the analyst sees the Apple story continuing to gain momentum in 2007, as the company is addressing the fastest growing market segments that touch the digital consumer.
"Given Apple's current trajectory, legitimate competition in these markets in 2007 is unlikely," he said. "While seemingly aggressive, we expect Apple can outperform the competition for multiple years, assuming the current pace of innovation continues."
While not necessarily a catalyst for Apple's business, PiperJaffray said another Apple stock split should deliver a mild positive for Apple shares. The firm notes that Apple shares last split in the $80 range, and says it expects a 2-for-1 split will be announced by Apple soon.
PiperJaffray maintains an "Outperform" rating on Apple shares.
Comments
If anyone is thinking to buy, don't wait for a split!
But, at least, the analysts are coming around to my own prediction of a $100 share price.
Heh... "The Munster"?
I'd be very happy to see a nice clean growth curve on Apple's part.
Hey, Mel... just let us know when you're thinking of selling...if ever.
Just consider this little fact. About 40 million iPods have been sold so far, in about 4 years... So what does that mean? Well, Sony sold about 200-300 million Walkmans during the 80's and 90's. The world economy today is a lot better than back then, meaning there is more buying power and more consumers that can afford it (a bigger middle class, world wide), so I expect the numbers of iPods to get to that number, AT LEAST.
And that's just counting the iPods. If the sales of Intel Macs really take off, and we get a new home entertainment product that gets the popularity of the iPod, then well aapl doesn't seem overpriced to me. Yes, it has about the same marketcap as Dell right now, but the potential for Apple is a lot larger than Dell's, in the long run.
Just my 2 cent...
Originally posted by hmurchison
Apple is severely overpriced.
No, it's not.
Companies such as Apple, with rising profits, severe growth curves, no long or short term debt, and a good deal of cash on hand and investments, are almost always valued much higher than traditional manufacturing or retail businesses.
Apple has a high P/E. Some people take that as a sign that the company is over valued. But that would be wrong.
First of all, it isn't some indicator that has an actual meaning. It's simply a number that expresses a level of confidence that the company will, or won't, perform at a certain level in the near future (6 months to a year, or two). There are traditional values for this. Manufacturing has been 10, electronics has been 20, etc. Companies with dividends have lower P/E's than those that perform as well but don't distribute. But these numbers keep changing.
If Apple can continue its rise, then the price will reflect that. If, on the 18th, the profit is at the level expected, the P/E will drop, proving that the value is correct. If the profit is not what is expected, then the stock will drop, bringing the P/E down as well.
It's simply a bet that the performance is where people think it will be.
Remember that Apple has out performed the streets expectations for a while now.
This quarter, from the little we know, was a blowout. Apple predicted $4.7 billion in sales vs. $3.49 billion last year. The highest number the street rationally gave was $5.1 billion. The increase over both ($5.7) was enough to leave them with their mouths hanging open.
Actual sales breakdown was just as impressive. The stores breaking $1 billion this quarter for the first time, an amazing feat! This puts Apple in with a highly unusual group, a successful specialty retailer that's also profitable. Something few thought Apple could accomplish when they first started out.
14 million iPods! The highest estimates, and thought to be far out of the mainstream were for 12.5 million. The highest estimates that were considered to be realistic were for 11.5, and even that was considered to be unlikely because of the reported shortages. It was thought that Apple would make 10 million, maybe a bit more, if 5G sales were particularly good. Then the shortage of the 1GB Shuffle dropped that estimate down further.
Evidence that sales were pushed to the higher end (and more profitable) seems to be good.
Apple also had high software sales, if the people I've spoken to are correct (they usually are).
But the sales of the Mac was most welcome. Apple sold about 1,250 million of them this quarter. More than ever before. While the growth from the previous excellent quarter wasn't extreme, it still showed upside. Considering that people were still expecting a drop, this was very good news indeed.
If we can expect sales of the new iMac and MacBook Pro to exceed that of the older units, especially for the MBP, sales should do well this quarter too. We will have to see if Apple comes out with other new units this quarter before we know the impact overall. The only difficult spot I see is that now people might hold off on the purchase of other older models because of the shortened timeframe.
I had mentioned earlier in late December that as 10.4.3 had G4/Altivec support, Apple could have snookered us into thinking that the switch would take place over two years because of the limitations of Rosetta, but that he must have known that they would be bringing G4 support to it all along, even though he gave NO hint at all that it would.
Well, it does seem to be true.
While the computer sales have improved I still think they are a weakness in Apple's strategy. Not enough switchers are coming.
What happens when it's no longer cool to have an iPod?
Originally posted by hmurchison
The reason why I say Apple is overpriced is because their profits largely hedge on the continued success of the iPod.
While the computer sales have improved I still think they are a weakness in Apple's strategy. Not enough switchers are coming.
What happens when it's no longer cool to have an iPod?
Apple's computer sales are still driving the company. As I pointed out sales increased to their highest level ever. and this is with the Intel switch hanging over its head, when predictions were for sales to fall the last two quarters. But, they have confounded critics by continuing to rise appreciably.
Estimates of sales for this year are for a low of 5.5 million, up to an (I think) unrealistic 8.5 million. But, if sales increase to 6.5 million, a not impossible number, Apple will show that its strength is not just in iPods, or music.
Speaking of which, most analysts think that it will be very difficult for any company to catch up in the next year or two, at least.
Samsung is claiming that during 2007 they will claim the top spot. But that claim is being greeted with question marks. Even in Japan, where Japanese manufacturers almost always break the foreign manufacturers (look at MS XBox sales against the as yet non existent PS3), the iPod, and iTunes music sales have broken away from the pack and now dominate with about two thirds of the sales. Even sales of Macs have taken a turn for the better.
Chinese companies have fallen over themselves to license their music to Apple when Apple opened iTunes in Japan. Now you can get Chinese music from iTunes everywhere.
From friends who travel to China a lot on business, I've been told that Apple has big ads up for iPods in every big city they've been to. Sales are taking off there as well, even though iTunes itself is not to be seen. That is potentially, the largest market. Apple is moving into India as well.
I've read that Apple is in 8% of the homes in the US and Canada, but that the potential is over 75% of homes. They have smaller shares overseas, and in the rest of the Americas.
So what is the possible yearly market for an iPod worldwide? Would you believe upwards of 150 million units? Then there are the sales of songs, and now, of course, videos, which are doing remarkably well, considering how little is being offered, so far.
With the other products it has been suggested that Apple will be coming out with, and I see no reason that they won't, Apple will be expanding their business appreciably over the next year or two.
But, remember that a valuation is not forever. This year, Apple will rise to at least $100. After that, we have to see how much of this will follow through. I said from the middle of last year that Apple would hit $20 billion, end of the 2006 fiscal year, others are now saying the same thing, going even further. At the end of this quarter we will see if they will make $21 billion. It's a close call now.
http://www.theaustralian.news.com.au...55E643,00.html
Originally posted by hmurchison
The reason why I say Apple is overpriced is because their profits largely hedge on the continued success of the iPod.
If you're so certain that the stock is overpriced, why don't you short it?
So buckle up!
Originally posted by tink
Over priced or not, one thing about Apple's stock price is that there is significant potential for wild price swings up and down.
So buckle up!
What do you consider to be wild?
That's the the down side of wild, I think the upside is what we are seeing now.
Originally posted by tink
I can easily see 10 down with a slow climb back up. People have always spooked easily with Apple. I think one thing that is different currently is that even the bears are stepping out of the way of this train.
That's the the down side of wild, I think the upside is what we are seeing now.
It depends on what happens during the conference Wednesday. If, as I expect, things went well, the stock will rise a few more points.
A few days later, as it usually does, it will drift down a bit. A lot of what happens here has to do with the markets themselves. If the markets drop, so will Apple. Right now, anticipation is high. Profit taking after the announcement will also take its toll.
But, unless we get an unhappy crossing of coincidence, I don't see a 10% drop. I do expect that 5% can be expected, possibly until we hear (hopefully) good news about the sales of the new units and iPods at the end of the month, and onward.
If Apple comes out with new units during this time, the stock should move up again as well
My only concern now is whether the announcement of the new plan of moving over by the end of the year causes less older machines to be sold which would outweigh the increases of new machines.
But, one thing restraining any wild swings is the fact of high institutional ownership.
Exciting times for Apple, the company really does feel like it has some serious momentum regardless of the stock price. (Mind share has really really changed towards the positive in the last year or two also, which bolds well.)
That being said the looming market cap valuation visa-vi companies like HP and Dell who have much higher revenues but similar market caps can weigh on the minds of the rationalist in the market and the momentum buyers flip shares on a turn of a time....
Originally posted by tink
That being said the looming market cap valuation visa-vi companies like HP and Dell who have much higher revenues but similar market caps can weigh on the minds of the rationalist in the market and the momentum buyers flip shares on a turn of a time.... [/B]
That's quite true. But their margins have been going down, and their growth has slowed markedly. Look at Dells growth particularly.
Hp is strong in consumer electronics, with good products.
Originally posted by ibuzz
all i know is, back in october 04 when i bought my imac G5, the stock was $36. Oh how i wish i had picked up more than my computer then!!!
Well, I did say here that it would get to about $85 when the analysts conference comes. I just thought it would happen the next day.
Originally posted by ibuzz
all i know is, back in october 04 when i bought my imac G5, the stock was $36. Oh how i wish i had picked up more than my computer then!!!
Not to rub it in, but the stock split since then, so it was actually the equivalent of $18 per share in October 2004.