It's Time to Load the Apple's (AAPL)
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It may be time to reload on Apple (Nasdaq: AAPL) shares again.
While shares are seeing a little bounce with the market early Wednesday, the stock is still down 6 percent over the last month and down 11 percent from their all-time high.
Bears will point to the company's recent earnings miss last quarter and the death of visionary Steve Jobs as reasons the stock may be dead money. But even as long-term bulls like Jim Cramer are walking away from the stock, the glaring valuation disconnect just can't be ignored.
First the cash...
Apple was sitting on $81.6 billion in cash as of the end of the fourth fiscal quarter. That's equal to approximately $88 per share. Unlike Mr. Jobs, current CEO Tim Cook said he's "not religious" about keeping it. There has been all types of speculation that he will announce some measure to return some of the cash to shareholders via a share buyback or dividend.
Either way, backing out the cash from the current share price of $379 gets you to a price of $291 per share.
The Earnings Power...
While Wall Street got ahead of the stock last quarter, the fact of the matter is Apple grew revenues 39% in the quarter to $28.27 billion and grew net income by 54% to $7.05 per share. For the fiscal year, Apple grew revenue 66% to $108.25 billion and net income 85% to $27.68 per share.
Looking ahead, Apple said it expects first quarter 2012 revs of about $37 billion and EPS of about $9.30. The rarity on the guidance was that it was ahead of the then Wall Street consensus, which at that time was $8.98 for EPS and $36.63 billion for revenues. The company normally sandbags on the guidance.
For the year, analysts see the company posting $138.99 bilion in revenue on earnings of $34.56 per share. This would represent solid growth, albeit at a slower pace of 28% for revenues and 25% on EPS.
The Fact of the Matter...
While the law of big numbers is finally catching up with Apple, valuation looks appealing. The $291 ex-cash number suggests a multiple of 8.4x.
With the growth that Apple is showing, the stock should at least be trading at a market multiple of 13x. That would be $450 (19% upside). Of course the market is not showing the strong top and bottom line growth that Apple displays, which of course would suggest the stock is that much cheaper. A $500 stock price, just based on current fundamentals, should be a given.
While shares are seeing a little bounce with the market early Wednesday, the stock is still down 6 percent over the last month and down 11 percent from their all-time high.
Bears will point to the company's recent earnings miss last quarter and the death of visionary Steve Jobs as reasons the stock may be dead money. But even as long-term bulls like Jim Cramer are walking away from the stock, the glaring valuation disconnect just can't be ignored.
First the cash...
Apple was sitting on $81.6 billion in cash as of the end of the fourth fiscal quarter. That's equal to approximately $88 per share. Unlike Mr. Jobs, current CEO Tim Cook said he's "not religious" about keeping it. There has been all types of speculation that he will announce some measure to return some of the cash to shareholders via a share buyback or dividend.
Either way, backing out the cash from the current share price of $379 gets you to a price of $291 per share.
The Earnings Power...
While Wall Street got ahead of the stock last quarter, the fact of the matter is Apple grew revenues 39% in the quarter to $28.27 billion and grew net income by 54% to $7.05 per share. For the fiscal year, Apple grew revenue 66% to $108.25 billion and net income 85% to $27.68 per share.
Looking ahead, Apple said it expects first quarter 2012 revs of about $37 billion and EPS of about $9.30. The rarity on the guidance was that it was ahead of the then Wall Street consensus, which at that time was $8.98 for EPS and $36.63 billion for revenues. The company normally sandbags on the guidance.
For the year, analysts see the company posting $138.99 bilion in revenue on earnings of $34.56 per share. This would represent solid growth, albeit at a slower pace of 28% for revenues and 25% on EPS.
The Fact of the Matter...
While the law of big numbers is finally catching up with Apple, valuation looks appealing. The $291 ex-cash number suggests a multiple of 8.4x.
With the growth that Apple is showing, the stock should at least be trading at a market multiple of 13x. That would be $450 (19% upside). Of course the market is not showing the strong top and bottom line growth that Apple displays, which of course would suggest the stock is that much cheaper. A $500 stock price, just based on current fundamentals, should be a given.
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