Apple RT: 107,01$ -2,15% trend +
May 15, 2007
Why Betting Against Apple Will Backfire
Apple Inc. (NASDAQ: AAPL) hit another new 52-week high today as it traded above $110 earlier this morning. According to historical price data, Apple has actually been hitting a new 52-week high each day for the previous nine trading sessions. Does this mean Apple is overvalued, technically overbought and shortable? Maybe in the short run it might be due for a profit taking fall, possibly testing the century mark, but it is difficult to believe that any downturn would be more than short term.
It is almost like shorting Google Inc. (NASDAQ: GOOG) for a few days hoping to catch a few points. In the short term you might make out fine, but in the long run, you never want to bet against a company that continues to dominate and increase its market share in the search area while launching new products virtually every day. As "old fashioned" as it might sound, a buy and hold strategy works well for such growth companies.
The same can be said for Apple. On April 25, the company posted revenue of $5.26 billion and net quarterly profit of $770 million, or $.87 per diluted share nearly 88% higher than the year ago period. On average, analysts were looking for earnings of $.64 per share on sales of $5.17 billion. Major product releases such as the iPhone in June and a possible Tablet Mac or Widescreen iPod will only help to continue to support Apple stock. Piper Jaffray analyst Gene Munster believes these new products will continue to bolster the company's earnings per share numbers. He holds an "outperform" rating and a price target on Apple of $140.
UBS analyst Ben Reitzes notes that Apple will grow its share in the personal computer market, expecting the company to ship 6.7 million Mac units in 2007, up from 5.3 million in 2006 and 3.2 million in 2004. He forecasts 8.4 million units to be shipped in 2008. Reitzes also sees upside for the Apple TV which could eventually become a challenger in the 420 million unit DVD player market as more content becomes available on iTunes. He believes that "Apple TV could be a $1 billion ecosystem for Apple within a few years." As for the iPhone, Reitzes is projecting 850,000 iPhones to ship in 2007 and 7.4 million the year after, estimates that could have upside once the iPhone debuts (note: when unveiling the iPhone in January, Apple CEO Steve Jobs originally set a goal of selling about 10 million units in 2008). Depending on how well it sells, the iPhone could add as much as $.70 to the earnings per share number and $6 billion in revenue for 2007 alone. Not surprisingly, Reitzes is also bullish with a $123 price target on Apple shares. The stock is currently trading lower by $1.13, or 1.03%, to $108.23 on light volume.
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