Wednesday, May 09, 2007
A leading pair picks Apple
Two of the very best stock pickers in the advisory world are reasserting their buy ratings for Apple (NASDAQ: AAPL), and boosting their targets. Jon Markman, editor of Strategic Advantage says, “Apple is one of my favorite ideas for new money right now. “
Toby Smith, editor of Changewave Investing notes, “Investors how have one more chance to jump in to Apple before the shares take off for the moon after the launch of the the iPhone.” Here are their reviews.
Jon Markman explains, “Apple recently hammered home its fiscal second-quarter results, growing earnings an amazing 88% over the same period a year ago -- the 16th consecutive quarter in which it has provided material upside to expectations.
“In recent years, much of Apple’s performance has been driven by the iPod/iTunes phenomenon. Therefore, it’s easy to forget about Apple’s roots in computing. But the latest quarter demonstrated how important the Mac lineup remains to the company’s bottom line, and how much success it is having selling them.
“Globally, Apple shipped out 1.5 million Macs during the quarter, which is up a whopping 36% over last year. This is the highest growth rate in six quarters and is even more impressive considering that this quarter represents the three-month post-holiday doldrums for retail sales.
“If your jaw hasn’t dropped yet, you can also compare this to the PC industry’s 10.9% global growth rate or the mediocre 3.6% growth seen here in the U.S.
"Moreover, margins on these new Macs came in much higher than expected, thanks to super low flash memory costs. Company wide, the gross margin rose to 35%, which is the highest in nearly 14 years.
“We can look forward to the new version of Apple’s OS X operating system, dubbed Leopard, to pounce by October. Also on the horizon is a revamp of the iPod line later this year.
"Look for the addition of wireless connectivity for the iPod, probably in the form of Bluetooth compatibility, and a higher resolution widescreen model to the offerings.
“Of course, the June launch of the eagerly anticipated iPhone is also approaching. Apple intends to account for iPhone sales over a two-year period, an approach that will help smooth results. Buy AAPL on any dips for my target of $140.”
Toby Smith notes, “In the wake of Apple's blowout earnings, I think this baby is still worth accumulating for the incredible profits to come. Apple is a technology superstar that deserves a premium valuation. The company is growing as fast as just about any other established technology firm, including Google.
“If Google can be valued at a forward price-to-earnings ratio of 45, then Apple should be valued at least around 25 times fiscal-year 2008 earnings.
"If you add up all of the growth we expect to see in Mac computers, Apple TVs and iPods, along with the new iPhone sales, you get approximately $6 per share in cash flow. At 25 times cash flow, you get a share price of $150.
”One of the reasons I've been so confident about Apple's prospects here is due to the clear signals we're receiving from our trusty ChangeWave Alliance – a group of thousands of consumers, professionals and experts in a wide range of industries whom we survey on an ongoing basis.
“The Alliance has been very accurate in forecasting Mac and iPod sales. According to our latest Alliance research, the iPhone is set to rock the entire cell phone industry.
“Our latest Alliance surveys tell us that nearly 1-in-10 members responding are likely to buy the new iPhone once it becomes available in June. And 4 out of 5 in this group say it will likely replace their existing cell phone. That's tremendous -- and I think we are all convinced by now that when the Alliance talks, we should listen.”
posted at 11:12 PM
