Apple still a top pick in 2006?
Although some investors believe the easy money has already been made, research and investment firm PiperJaffray said it sees further potential in Apple's business and lists the company's stock as one of its top three picks for the new year.
The firm also highlighted Adobe and Avid as its other top picks. The three companies were chosen because they have healthy consumer bases and are likely to benefit from new product introductions and identifiable changes in their respective industries.
Apple
"Why, despite the run in Apple, are we highlighting the name as a top pick?," analyst Gene Munster wrote in a research note released on Wednesday. "Investors believe the easy money has been made, but we see more upside potential in Apple's business, and sentiment suggesting that growth has peaked leads us to believe that Apple shares will respond positively to any outperformance."
While Munster does not expect to see a slowdown of new and updated iPods in 2006, he believes a more important story will be the evolution of the Macintosh line in the new year. The analyst expects the move to Intel processors and the need for new Mac form factors to lead to the launch of several new and updated models that will generate consumer interest.
Adobe
Commenting on Adobe, Munster said the company's customer base -- which now includes that of Macromedia -- is as strong as he has seen it.
While the general consensus on the Street is that 2006 will be a slow product release year for Adobe, the analyst believes Adobe will benefit from the recently released Adobe/Macromedia bundled products, Acrobat 8 in late summer/early fall, sporadic releases of various new enterprise-level product combinations, and anticipation for a shipment of CS 3 in early 2007.
Avid
Of PiperJaffray's top three top picks, Munster said Avid likely has the highest risk profile, with more quarter-to-quarter volatility in results than either Adobe or Apple.
"That said, the company is in a leadership position in the markets for high definition post production and broadcast newsroom systems, both of which are in the midst of major multi-year industry upgrade cycles," the analyst wrote.
PiperJaffray maintains an "Outperform" rating on Apple shares with a target price of $80.
The firm also highlighted Adobe and Avid as its other top picks. The three companies were chosen because they have healthy consumer bases and are likely to benefit from new product introductions and identifiable changes in their respective industries.
Apple
"Why, despite the run in Apple, are we highlighting the name as a top pick?," analyst Gene Munster wrote in a research note released on Wednesday. "Investors believe the easy money has been made, but we see more upside potential in Apple's business, and sentiment suggesting that growth has peaked leads us to believe that Apple shares will respond positively to any outperformance."
While Munster does not expect to see a slowdown of new and updated iPods in 2006, he believes a more important story will be the evolution of the Macintosh line in the new year. The analyst expects the move to Intel processors and the need for new Mac form factors to lead to the launch of several new and updated models that will generate consumer interest.
Adobe
Commenting on Adobe, Munster said the company's customer base -- which now includes that of Macromedia -- is as strong as he has seen it.
While the general consensus on the Street is that 2006 will be a slow product release year for Adobe, the analyst believes Adobe will benefit from the recently released Adobe/Macromedia bundled products, Acrobat 8 in late summer/early fall, sporadic releases of various new enterprise-level product combinations, and anticipation for a shipment of CS 3 in early 2007.
Avid
Of PiperJaffray's top three top picks, Munster said Avid likely has the highest risk profile, with more quarter-to-quarter volatility in results than either Adobe or Apple.
"That said, the company is in a leadership position in the markets for high definition post production and broadcast newsroom systems, both of which are in the midst of major multi-year industry upgrade cycles," the analyst wrote.
PiperJaffray maintains an "Outperform" rating on Apple shares with a target price of $80.
Comments
Is anyone truly surprised? I'm not.
"Firm: Apple still a top pick in 2006"
(The question mark doesn't bother me. It's a top pick for SOME analysts. Not for all. So is it a top pick for you?)
If Thinksecret is correct, Avid could be on a rocky ride. It would depend upon how polished their (Apple) new versions would be, as well as how well the hardware supports it.
A new version of the PM Quad G5 in March? That would lend strength to the idea that Apple will wait until 2007 to replace it with an x86 line. Otherwise, I can't see Apple wasting their resources on PPC development of such a huge project.
I've been planning on putting my purchase of a Quad on hold, because of possible pushing up of the x86 version. I figured what we saw at Macworld would let us know how fast Apple would be moving on that. But, now I don't know.
I guess it's wait 'till march. I will get the FCP Studio 6 upgrade, but not the Extreme.
People are quick to say that people will instead run Mac OS X hacked on their PCs but lets not forget that MOST people still buy their software. Not to mention that with each new update to Mac OS X there is another loophole to hacking it. It just won't be very practical to run a hacked version of Mac OS X when it will run better on an a mac anyways. To me the people who most likely will run a hacked version of Mac OS X are the people who use Linux and compile their own kernels. They make up less then 1 percent of the population and aren't even a target market for manufactured computers.
Combined with the fact that Apple has its iPod empire now which is millions strong and has a huge majority of the market (which most likely will get bigger because all the cool accessories target the iPod). It will be hard for Apple to just start losing money. Especially since Intel chips are produced in much larger quantities and should offer a decrease in cost. You also have the fact that the biggest video download service will most likely be iTunes and its setup for the iPod. Bare in mind that the iPod Music Store is the fastest growing store involved in media sales. It is set to bypass the 6 ahead of it in the near future.
If you look at these things, the only thing that could really destroy their stock in the future is a HUGE flop. Like the intel macs crash like the Xbox, future iPods break too much or something that has not really ever been known to hit Apple. If you plant to sell your stock now I would have to wonder why you chose now instead of six months ago because its not like we are predicting an end to Apple's ability to produce cool new stuff.
Originally posted by CosmoNut
This is another case of AI "journalism" run amok. There should be no question mark in the subject. The headline should be:
"Firm: Apple still a top pick in 2006"
Run amok? Puh-lease. That's just hyperbole falling through your ethernet cable.
"Apple still a top pick in 2006?"
Is anyone truly surprised? I'm not.
Apple will need to make the right moves and its competitors need to make the wrong moves for the ride to continue.
First and foremost OS X has to outperform and out function Vista on Intel Core chips.
The iPod has to continue its dominance. Not only because of iPods revenue. But more importantly the iPod has empowered Apple to cut deals directly with content creators. It appears Apple's strategy is to distribute content itself and not depend on recroding from broadcast or cable television. Apple does not need to depend on other distribution companies. Which is its stregnth now, but would become a weakness if the iPod falters.
Apple needs to repeat its current success with new products. It would be extremely difficult to invent a product that would be as successful as the iPod, but Apple will need to release new products that in general are very successful.
4K is a lot (A LOT) of data. Final Cut Extreme would be as hardware dependent on video accelorators and storage as a current high end Avid is. But at $10,000 comes in quite a bit cheaper.
Sounds as though the PowerMac is due for some very very good specs.
-Quad Core
- Nvidia SLi
-10G Ethernet
-Blu-ray burner?
Are we going to get internal RAID?
My concern would be of Avid's responce.
Avid is still the dominant NLE system for movies and television. FCP is gaining market penetration but still not as ubiquitous as Avid.
Will Avid continue to compete with Apple on Apple's platform? Will Avid lean more heavily in favor of Windows? Or will Avid largely abandon the Mac the way Adobe did with Premiere?
Most of the Avid post houses I know of are running largely on Macs. Avid has a large customer base on Mac, so I suspect they will have to compete with Apple on its own platform.
Oh also basically eveyone I know using ProTools is using it on a Mac. So that answers that.
Originally posted by TenoBell
This new Final Cut Extreme sounds very very interesting. This is one rumor out of the last few from ThinkSecret that makes sense.
4K is a lot (A LOT) of data. Final Cut Extreme would be as hardware dependent on video accelorators and storage as a current high end Avid is. But at $10,000 comes in quite a bit cheaper.
Sounds as though the PowerMac is due for some very very good specs.
-Quad Core
- Nvidia SLi
-10G Ethernet
-Blu-ray burner?
Are we going to get internal RAID?
My concern would be of Avid's responce.
Avid is still the dominant NLE system for movies and television. FCP is gaining market penetration but still not as ubiquitous as Avid.
Will Avid continue to compete with Apple on Apple's platform? Will Avid lean more heavily in favor of Windows? Or will Avid largely abandon the Mac the way Adobe did with Premiere?
Most of the Avid post houses I know of are running largely on Macs. Avid has a large customer base on Mac, so I suspect they will have to compete with Apple on its own platform.
Apple's FCP Studio has one third of the total market for video editing products *in its price range (and somewhat beyond)*. This includes PC products.
Avid mostly competes in the high end - $20,000 to $100,000.
This is the product range Apple will be directly aiming for here - with a more advanced product.
Originally posted by melgross
Well, I'm not selling my 10,000 shares yet.
Why not? Keeping three quarters of a million dollars committed to elk out a possible $30,000 gain is a terrible return of less than 4%.
Nick
Apple's FCP Studio has one third of the total market for video editing products *in its price range (and somewhat beyond)*. This includes PC products.
Yes this is true. FCP overwhelmingly dominates what has been dubbed the "Prosumer" market. Pretty much every editor I know or anyone who can make any return on their investment. $1000 for the functionality of FCP is a pretty sweet deal.
On the other hand once you begin to talk about a $10,000 system. This is firmly in the pro market. There are plenty of die hard Avid people in the Pro market.
FCP still at this point has some flaws and bugs that are deal breakers for the die hard Avid Pro. The complaints are justified because there are bugs in FCP that Apple should have fixed by now. So that leaves some with the question will Apple ever fix these bug. There are a number of people in the ($10,000 Pro market) who feel until these issues are addressed they will not be using FCP.
-Quad
-PCIe
-Nvidia SLi
-Blu-ray/HD-DVD
-10G Ethernet
-internal RAID (hopefully)
A machine like this will for most editors make editing 1920x1080 HD practical and affordable.
This much power will make editing slightly compressed HD as easy as editing uncompressed SD is now.
Originally posted by trumptman
Why not? Keeping three quarters of a million dollars committed to elk out a possible $30,000 gain is a terrible return of less than 4%.
Nick
Maybe he's planning on keeping it for another 10-20 years.
Hell, that's what paid for my college education! A measily $3000 that I inherited when I was 2 when my grandparents died and invested in AT&T and Southwestern Bell. At the time I went to college (96-00) those were great long-term investments (they suck now, but that's another story) and they paid my way.
I read an interesting article the other day; if you investec 100,000 in Kodak 20 years ago, you'd now have $150000 dollars (horrible 4% annual return). If you'd invested in Oracle, you'd have $6,000,000.
Originally posted by Flounder
Maybe he's planning on keeping it for another 10-20 years.
Hell, that's what paid for my college education! A measily $3000 that I inherited when I was 2 when my grandparents died and invested in AT&T and Southwestern Bell. At the time I went to college (96-00) those were great long-term investments (they suck now, but that's another story) and they paid my way.
I read an interesting article the other day; if you investec 100,000 in Kodak 20 years ago, you'd now have $150000 dollars (horrible 4% annual return). If you'd invested in Oracle, you'd have $6,000,000.
I think you are sort of making my case for me.
Apple is being heralded as being a great investment next year when the return on it will be under 4%. (Kodak) Why not put your money into the next Oracle instead?
Nick
Originally posted by trumptman
Why not? Keeping three quarters of a million dollars committed to elk out a possible $30,000 gain is a terrible return of less than 4%.
Nick
Assuming that you actually know that what you are saying is true. I'm betting that you are wrong. My broker has been trying to get me to sell when it was $38 - before the split. I bet my own knowledge before anyone elses. I've been trading since I was 13. That was back in 1963. I've done pretty well since then. I expect minor burps along the way. There is a tax issue as well that has to be taken into account when you sell.
Originally posted by trumptman
I think you are sort of making my case for me.
Apple is being heralded as being a great investment next year when the return on it will be under 4%. (Kodak) Why not put your money into the next Oracle instead?
Nick
I have no idea where you get this idea of a 4% return. I fully expect Apple to increase its sales by at least 25%. Possibly to 40%. In doing so, I expect its net profit to remain in the 12% area, thereby increasing by those same percentages. It might even go higher. Apple's margins are around 30%, higher than any other computer or consumer company in any business that resembles Apples. I believe that their margins, after the Intel switch, will go even higher, as some R&D costs are pushed over to Intel.
I also expect Apple to continue to gain in the broadcast media front, as other major players align their sales with iTunes. Estimates for iPod sales this year are on the order of 45 to 60 million units; several times 2005's sales. I also expect Apple's computer sales to grow about 35% over 2005's numbers. Software sales, which are increasing at a good pace, are very profitable, and will continue to generate a considerable percentage of dollars, especially if Leopard is released at least two months before the fourth quarter is over, we'll see about that one later.
You might be interested to know that institutional investment in Apple is over 72%. That's a high number, and shows considerable confidence by those large investors. This percentage has been increasing over the past year, and continues to increase.
If Apple makes its numbers, the stock could rise by another 3 points. If expected products emerge during Macworld, it could rise another 3.
Even if it doesn't, and the stock drops 5 or more points as a result, by waiting until the middle of the month, capital gains kicks in for me. That's a 20% difference in my tax rate for a stock sale. I've bought the stock, and sold it twice during the time that I bought it back when it was $16.93 a share. The last time I held it before was in late 1999. I have been holding other stocks as well during this time, but they have been for much shorter times.
So, I might sell later in the month, or I might continue to hold.
But if Apple follows through, as I expect them to, then later this year I expect to see $100. I haven't been wrong yet.
Originally posted by melgross
I have no idea where you get this idea of a 4% return.
I get it based on your current investment and what it would grow to if Apple hits 80 from the current 75ish.
I fully expect Apple to increase its sales by at least 25%. Possibly to 40%. In doing so, I expect its net profit to remain in the 12% area, thereby increasing by those same percentages. It might even go higher. Apple's margins are around 30%, higher than any other computer or consumer company in any business that resembles Apples. I believe that their margins, after the Intel switch, will go even higher, as some R&D costs are pushed over to Intel.
While this might maintain the current stock price (and with a P/E of 50 it will need to do that) I really don't see how this benefits you unless they start paying dividends.
I also expect Apple to continue to gain in the broadcast media front, as other major players align their sales with iTunes. Estimates for iPod sales this year are on the order of 45 to 60 million units; several times 2005's sales. I also expect Apple's computer sales to grow about 35% over 2005's numbers. Software sales, which are increasing at a good pace, are very profitable, and will continue to generate a considerable percentage of dollars, especially if Leopard is released at least two months before the fourth quarter is over, we'll see about that one later.
I don't think they will hit that number of iPod sales. Taking a starting trend and charting it out exponentially is just the worst sort of tech investing. I'm not even arguing that Apple won't hit 80. I'm simpy saying that your investment in them would only grow 3.5-4%. That is reasonable growth, but nothing on the magnitude of the past.
You might be interested to know that institutional investment in Apple is over 72%. That's a high number, and shows considerable confidence by those large investors. This percentage has been increasing over the past year, and continues to increase.
If Apple makes its numbers, the stock could rise by another 3 points. If expected products emerge during Macworld, it could rise another 3.
Even if it doesn't, and the stock drops 5 or more points as a result, by waiting until the middle of the month, capital gains kicks in for me. That's a 20% difference in my tax rate for a stock sale. I've bought the stock, and sold it twice during the time that I bought it back when it was $16.93 a share. The last time I held it before was in late 1999. I have been holding other stocks as well during this time, but they have been for much shorter times.
So, I might sell later in the month, or I might continue to hold.
But if Apple follows through, as I expect them to, then later this year I expect to see $100. I haven't been wrong yet.
I would love for you to be right.
Nick
$80 from $75 is 7%, not 4%. But that's a short term gain.
Apple has hit P/E's in the mid 60's for short periods. It's almost a traditional number for them to hit. Right now, their P/E is 48. I don't see it as a problem. A P/E is a reflection of how investors see the company doing at some future date.
It's possible that the stock is fully valued, but I don't think so.
Unlike almost every company its size, Apple has no long term debt, no short term debt (of any significance), and around $8 billion in investments and cash.
Their operating margin is 29.02%, and their profit margin is 11.84%.
Institutional activity this quarter has been 61.56 million shares sold vs. 82.02 million bought for a net of +20.46 million. This is a good sign.
Earnings per share this year were $1.56. Current averaged estimates (as of last month) for next year are $1.88; a 20% rise. I think it will be revised upwards as it had been all this year, and last year as well. I see an earnings number for 2006 at over $2. That number will be determined in part by what we hear January 16th.
Originally posted by melgross
I've been told to get out of Apple several times, but fortunately, I don't listen to others when it come to investments.
Mel, as soon as you're ready to start your stocks & investing blog, I'm there. Sounds like you have a solid investing record.