On Friday, Apple announced that they have sold more than one million iPads. Steve Jobs said that they sold one million iPads within 28 days, while it took the iPhone 74 days to reach the one million marker. Apple’s stock has been trading at its all time high for a while. It has more than doubled since last year. Apple reported their quarterly earnings two weeks ago, where their Earnings Per Share for the quarter more than doubled to $3.33, compared to analysts’ estimates of $2.46. Sales were up 49% to $13.5 billion, beating analysts’ estimates of $12 billion.
My question is where is Apple stock going?
After doing some further analysis and reading, I was able to forecast Apple’s income for the year (2010). Based on that forecast, I assigned an appropriate P/E multiple to get a target price for Dec. of 2010.
I forecasted that Apple will sell in 2010 12 million Macs, 75 million iPods, 30 million iPhones, and 10 million iPads. Using the average price of each product line used in Apple’s reporting, and adding $2.5 billion worth of software sales and other income, I reached a sales figure of $56 billion. After applying a 20% net margin, since this is the margin Apple reported this past quarter and the previous quarters, net income equated $11 billion. I divided the net income by the number of outstanding stocks (900 million), and got and EPS of $12.44. I allocated a Price to Earnings ratio of 24 to the stock, as Apple is a growing company that should be trading at a premium to the Nasdaq’s 19x P/E. I arrived at a target price of $300, 15% above Apple current stock price.
I guess Apple’s stock has more room to grow.
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Loading ...Tags: apple, Apple's stock, Earnings, iPad, iPhone, iPod, mac, NASDAQ, stock, Target Price
Very interesting forecast.
Talking about stocks, do you prefer the local stock exchange or the international stock exchange?
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Naser Reply:
May 5th, 2010 at 11:38 am
Personally I prefer international markets, becasue I understand them better than local markets.
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Sal Reply:
May 9th, 2010 at 9:15 am
No one can even understand the Kuwaiti market. I would rather say I feel much safer investing in international markets. In Kuwait everyone seems to be an expert in everything, yet all seems lost.
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This is certainly a bear case scenario as you have omitted a lot of important factors from your calculation. Apple has beaten analyst estimates when technology spending was at its lowest levels, so certainly it will benefit going forward. Apple has far surpassed competition, as earnings growth over the past couple of years has been simply phenomenal and is still able to surprise Wall Street every quarter again and again. Apple has $23.5 billion in cash and zero debt!
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Don’t you see Apple Inc as a one man show? How do you incorporate that risk factor in your valuation?
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Sal Reply:
May 9th, 2010 at 9:20 am
Goodwill if you wish to categorize Jobs, so if you’re going to incorporate a risk then its Goodwill impairment risk. Apple will survive with or without Jobs, and the legacy will grow.
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The past few days their stock has dropped sharply, even with the news regarding the Ipad reaching 1million units sold before the Iphone. Does this have anything to do with the lawsuit filed against them by Adobe?
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Keynesian Reply:
May 9th, 2010 at 7:37 am
Nokia has also filed a suit against them. However, it isn’t any of the above. The overhang from European contagion is to blame.
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Sal Reply:
May 9th, 2010 at 9:07 am
Systematic risk my friend..Unless you hedged yourself you cannot escape the market risk.
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Sal Reply:
May 10th, 2010 at 8:27 am
Nokia Corporation announced that it has filed a complaint against Apple Inc. with the Federal District Court in the Western District of Wisconsin, alleging that Apple iPhone and iPad 3G products infringe five important Nokia patents. The patents in question relate to technologies for enhanced speech and data transmission, using positioning data in applications and innovations in antenna configurations that improve performance and save space, allowing smaller and more compact devices.
Source: Reuters
I think AAPL can beat for a consistent amount of time, but this EU unstability is putting a spanner in the works. How long do you think the EU will continue to affects APPLs price?
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Naser Reply:
May 19th, 2010 at 10:20 am
The EU is affect the whole World not just Apple. THese times are volatile, with markets go up and down by 3% and more. I’m not sure as to when this ordeal will end, but these external factors are making a fundementally-sound company cheap.
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