During the market disruptions of the past couple of months, we saw Apple (NASDAQ: AAPL) fall from a high of $148 to a low of $118 ( man, what an opportunity that was!!). The stock is now back up to $141 and this may be your last chance to buy it here under $150. Why? A lot of catalysts are on the near term horizon.
Apple finishes its fiscal year in 11 days. The September 30 quarter and year-end will wrap up an exceptional year for Apple, yet many would argue that the best is yet to come. I expect the year finishing in 11 days to have final revenue numbers of $24 billion with earnings per share coming in at $3.75. iPhone revenues will be somewhat relevant, but that piece of the Apple story is JUST BEGINNING. As Apple exits fiscal year 2007, the more relevant story is still the overwhelming success of the iPod with the corresponding iTunes store, and of course, the newly revamped Mac computer. Mac is gaining market share in a fairly fluid market.
The iPhone production is ramping up. For the year (calendar year), Apple had planned to produce 3.6 million iPhone units. That number is now at 4.8 million units in planned production. European nations will be rolled out for iPhone availability beginning in the calendar fourth quarter with the UK and Germany getting ready for the onslaught.
The question will be whether the iPhone is as popular on the other side of the pond as it has been here in the United States? Answer is: Apple hopes so, but it's not really relevant. Apple has modeled for 10 million units to be sold in total by year end 2008. With production already at 4.8 million by year end 2007, global roll out will be gravy and not critical to hitting expected numbers. Any European excitement and hype will certainly be welcomed, but it's not as necessary as some would lend you to believe.
In the meantime, the iPod's next generation has been received quite well and the Mac is just beginning to hit major traction. Not to be repetitive from previous articles, the retail store system, 187 strong, is a major competitive advantage for Apple. I called my buddy Nigel in London at the mega Regent Street Apple store and asked him about iPhone, iPod and the Mac. Nigel informed me that he and his co-conspirators at the store answer questions about iPhone's availability about "200 times per day with live customers and another 300-400 via phone-in requests."
I estimate Apple's fiscal year September 30 revenues at $30 billion and earnings per share of $4.50-4.60. The early take on fiscal year 2009 is revenues of $34.5 billion and earnings per share of $5.50. The earnings momentum is both strong and visible with Apple. iPhone revenues are being recognized over a 24 month contractual period, thus the visibility factor becomes that much more...visible!
The stock has been a buy for the past 3-4 years and will continue to be so over the next three years at least.This may be your last chance to get in below $150. My 2008 price target is $200-210.
Georges Yared is the CIO of Yared Investment Research and the author of "Baby Boomer Investing...Where do we go from here?"
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Reader Comments (Page 1 of 1)
9-19-2007 @ 6:21PM
mongul said...
"Apple has modeled for 10 million units to be sold in total by year end 2008."
Apple has modeled for 10 million units to be sold in calendar 2008.
http://seekingalpha.com/article/24432-apple-f1q07-qtr-end-12-30-06-earnings-call-transcript
"calendar year '08 is what Steve referenced in his keynote. The point that he made was that the worldwide market for total cell phones is somewhere around 1 billion and our objective of getting 1% of it would yield 10 million units across the calendar year."
http://seekingalpha.com/article/42374-apple-f3q07-qtr-end-6-30-07-earnings-call-transcript
"Finally, we reiterate our goal of selling 10 million iPhones in calendar 2008."
9-19-2007 @ 7:39PM
Constable Odo said...
Are you kidding. You think Apple's stock is just going to jump up $40 a share in a few months. Have you ever heard the term "lead overshoes"? Apple's stock has been wearing them for most of the year. Nothing is moving Apple's stock, not good market days, not analyst upgrades, not fed rate cuts. Everything and I mean even production increases seem already priced into Apple's numbers. Apple would have to sell 10 million iPhones overseas just to get to $185. Apple is Apple, it's not RIM. Fanboys like Apple products, not investors. Otherwise Apple would be flying for the stars right now.
9-19-2007 @ 8:17PM
gslv said...
Dear Apple: What are the chances of stock dividends? As to the stock value, it should rise when things go better than expected, which iPhone sales and share may do.
9-20-2007 @ 4:27PM
Dianne Olivo said...
Gee..that would make apple at $200./sh a 40x P/E.
Yep a sound investment indeed! Are you sure you're not smoking something with the guy at Piper Jaffrey?
9-20-2007 @ 7:27PM
E. David Zotter said...
While the current quarter will be a blowout... there is some medium term risk with Steve Jobs and this options fiasco that could put downward pressure on the stock as the 'media' starts to follow it closely.
9-21-2007 @ 1:39PM
Beltway Greg said...
Naysayers. If I had told you to buy RIM a year and a half-ago you would've cited the pending copyright infringement investigations and the crowded field in which it operates. Did you buy it then? Of course not. Now, you're confronted with a company that does oh so many more things and you stand firm? Why? Because mentally you refuse to think different. You, like so many other investors judge the future on the past. How can anyone write that Apple wears 'Lead shoes" with a straight face? Does it go straight up? No. If anything it's moves too much often against the market? Why? Because when things are going bad it's judged to be a safe haven in regard to overall growth. Look, if you want to be in JNJ that's fine. This game ain't for wimps. Turn off the Cramer and take a chill and
put your money in an ETF. If the stock dies so be it; there are other horses in the corral. At this point in time this one is Secretariat and even he had some bad days. Don't get all worked up. Sell if things go bad. It's no big deal. It's not as if you're going to be left off of the Xmas card list.
Beltway Greg
9-21-2007 @ 4:16PM
rip said...
@Constable Odo.
Umm, what stock market are you looking at? The one I follow, something called NASDAQ, and a stock listed as AAPL, is up 72% this year.
72% is hardly nothing. Lead overshoes??? What would you call the 3% return of the S&P 500? Lead and concrete with molasses poured on overshoes?
The iPhone is immaterial to Apple right now. Get over your silly comparisons to RIM. Apple makes more money from computer sales in one month than RIM makes in a year. Computer sales are growing >30%. That is where the earnings boost is coming from.
Mac sales are taking share. iPod continues to dominate. iPhone will eventually carve out a niche piece of the pie. Leopard will provide a very nice boost next quarter.
Can you say "company with excellent strategy and management and exceptional execution?"
AAPL is going to 170 within 6 months. 210 in 12.
9-22-2007 @ 3:47PM
Neil Anderson said...
Apple is on an upward cycle headed for the stars.