Kathryn Huberty - A Monday Market Mover?

  • Posted: 11 July 2009 02:25 PM

    This could be an AAPL mover on Monday morning
    from Barrons ‘‘The Trader’’ a very popular column


    WHEN MORGAN STANLEY ANALYST KATHRYN Huberty turned bearish on Apple (AAPL) last September, her report triggered one of the sharpest-ever selloffs in the stock, wiping out more than $18 billion of company’s market value in just 60 minutes.
    Yet many investors heeded her warnings—so they missed most of the tumble that took the price from near 180 to a winter ‘08-‘09 low of 80. Now Huberty has turned bullish again and, once again, it may be a call worth heeding. She sees the stock headed up from a current 138 to at least 180 again—and just maybe 270—within 12 months.
    Huberty, like lots of others, is upbeat on the prospects for the iPhone. But the point she makes is that amid all the hoopla over the recent launch of the iPhone 3G S, Apple’s core Mac business has been undeservedly ignored. Huberty figures that, as the personal-computer business heads for a revival, the biggest winner will be the Mac.
    Windows-PC unit sales will be down 11% for the third quarter and flat in the fourth quarter, she thinks, as buyers wait for a new operating system from Microsoft, Windows7. Then general PC unit sales will trend higher, rising maybe 9% in 2010 as big corporate users finally face the need to upgrade.
    But the Mac—and Apple—will be a bigger winner, especially as the company ramps up its typically strong back-to-school promotions.
    Apple computers already are on the ascent. “Commercial Mac shipments rose 25% month-over-month in May, compared with market growth of just 1%,” Huberty says. Following declines in Mac sales in the first two quarters, she now looks for growth in unit sales of 6% in the third quarter, 11% in the fourth quarter and 14% over 2010.
    Of course, the outlook for Macs could darken if consumer spending remains weak. And Apple shares could tumble if Chief Executive Steve Jobs’ closely watched health takes a turn for the worse.


    But assuming none of that comes to pass, Apple looks well-positioned for the months ahead. Huberty looks for earnings of $9 a share for the year ending September 2010—well above most estimates, which are under $7. Her 180 price target is based on Apple’s deserving a price/earnings multiple of 20, up from a recent 15.3. Historically, the stock has traded even higher than that, at around 25. “If the iPhone continues its gains and the Mac recovers, then Apple stock could rise to between 225 to 270,” she says. “Apple is now a company again firing on all cylinders.”

         
  • Posted: 11 July 2009 03:23 PM #1

    So all of a sudden she “got religion”?

    What’s the change in the company’s macro prospects or the company’s fundamentals from the bear call in September to today’s sunny forecast for earnings?

    I’ve been saying for awhile Apple should see a new al-time high within 12 months.

    Is the Street finally waking up?

    The company’s mid-term prospects are mind numbingly spectacular and the company will outpace the growth in both the PC and smart phone markets for the foreseeable future. If one divorces netbook sales from PC shipments one will see Apple and HP are the only remaining growth companies in a mature industry.

         
  • Posted: 11 July 2009 03:40 PM #2

    Is Huberty expected to report on Apple this Monday, or sometime during next week?

         
  • Posted: 11 July 2009 04:09 PM #3

    ?Apple is now a company again firing on all cylinders.?

    Again firing on all cylinders? Is that an oblique attempt to justify her stupidity from last September?

    I can’t remember the last time Apple was not ‘firing on all cylinders.’

         
  • Avatar

    Posted: 11 July 2009 10:42 PM #4

    I don’t want to rain on anyone’s parade, but aapl follows the market.  When we went from 200 to 100 the dow went from 14000 to 7000.  So if aapl were to hit 270 in the next 12 months, we would have the recovery in the market of almost 100%.  We would be seeing the DOW at 16,000. 

    How many of you given today’s unemployment, national debt, housing meltdown, and other issues, truly believe we could see the DOW at 16,000 in the next 12 months.

    Let’s be realistic here and recognize that Mac sales has slowed from 36% growth in 2nd quarter of 2007 to a 3% decline 2nd quarter 2009.  Yes we are making up ground with iPhones, and great margins, but there is no significant income growth to justify this stock doubling in 12 months.

         
  • Posted: 11 July 2009 11:00 PM #5

    Let’s not forget that the market is sometimes a forward looking creature

         
  • Posted: 12 July 2009 01:17 AM #6

    omacvi - 12 July 2009 01:42 AM

    I don’t want to rain on anyone’s parade, but aapl follows the market.  When we went from 200 to 100 the dow went from 14000 to 7000.  So if aapl were to hit 270 in the next 12 months, we would have the recovery in the market of almost 100%.  We would be seeing the DOW at 16,000. 

    How many of you given today’s unemployment, national debt, housing meltdown, and other issues, truly believe we could see the DOW at 16,000 in the next 12 months.

    Let’s be realistic here and recognize that Mac sales has slowed from 36% growth in 2nd quarter of 2007 to a 3% decline 2nd quarter 2009.  Yes we are making up ground with iPhones, and great margins, but there is no significant income growth to justify this stock doubling in 12 months.

    Good points, Sponge.  Very good.  But there is a case to be made that the market and the economy continue in the crapper while Apple outperforms.  If that were to come to pass, 270 would still be highly unlikely, but 140 to 180 is not impossible.

    As for Kathryn, she must have started reading AFB.  Come on Katie.  Quit lurking and start posting.

         
  • Avatar

    Posted: 12 July 2009 12:55 PM #7

    omacvi - 12 July 2009 01:42 AM

    I don’t want to rain on anyone’s parade, but aapl follows the market.  When we went from 200 to 100 the dow went from 14000 to 7000.  So if aapl were to hit 270 in the next 12 months, we would have the recovery in the market of almost 100%.  We would be seeing the DOW at 16,000. 

    How many of you given today’s unemployment, national debt, housing meltdown, and other issues, truly believe we could see the DOW at 16,000 in the next 12 months.

    Let’s be realistic here and recognize that Mac sales has slowed from 36% growth in 2nd quarter of 2007 to a 3% decline 2nd quarter 2009.  Yes we are making up ground with iPhones, and great margins, but there is no significant income growth to justify this stock doubling in 12 months.

    Sponge you have a way with statistics which all politicians would love.  Question how many Macs did Apple sell in 2nd Qtr 2007 1,517K and 2.268B revenue.  How many in 2nd Qtr 2009 2,216K and 2.945B.  That gives us 46% growth in units and 29.8% growth in revenue.  I would cautions using the rate of change in growth over such a small time period as it focuses on short term results and does not necessarily capture the trend.  If we compare AAPL vs the S&P or DOW Apple can hardly be said to follow.  I did a 5 year chart since most financial planners recommend a minimum of 5 year time horizon if you are committed to stock investments.

    Funny looks to me like Apple is crushing the S&P and DOW over a reasonable time period.  So what has to happen to move AAPL to 270.  Historically as we move out of recession to growth, the P/E multiple of growth stocks is bid up and earnings accelerate.  The consensus 2009 estimate 5.56.  I will use Deagol’s 2009 Non-GAAP 7.85 and his 1-yr Apr-10 target 8.91 .  25 X 8.91 = 222.75 30 X 8.91 = 267.3 33.97 X 8.91 = 302.67 (The 5 year average P/E for AAPL is 33.97).  The 1 yr 270 estimate is quite reasonable in my humble opinion.

         
  • Posted: 12 July 2009 01:49 PM #8

    pats - 12 July 2009 03:55 PM

    Funny looks to me like Apple is crushing the S&P and DOW over a reasonable time period.  So what has to happen to move AAPL to 270.  Historically as we move out of recession to growth, the P/E multiple of growth stocks is bid up and earnings accelerate.  The consensus 2009 estimate 5.56.  I will use Deagol’s 2009 Non-GAAP 7.85 and his 1-yr Apr-10 target 8.91 .  25 X 8.91 = 222.75 30 X 8.91 = 267.3 33.97 X 8.91 = 302.67 (The 5 year average P/E for AAPL is 33.97).  The 1 yr 270 estimate is quite reasonable in my humble opinion.

    On the subject of P/E’s, Amazon is at 50!

         
  • Posted: 12 July 2009 02:01 PM #9

    While Apple has a high beta and tends to exaggerate the moves (up or down) in the broader market, the recent share price activity reflects a slowing of the pace of Mac unit sales gains as well as the rising percentage of revenue subject to deferred revenue accounting.

    I look at it this way: The slowing economy is like a traffic jam with all traffic moving at reduced speeds due to economic obstacles in the road no matter the make, model or capabilities of one’s car or the capabilities of the company’s economic engines. As the traffic clears, which companies are best equipped to outperform the market and the competition based on clear (or less congested) economic conditions?

    The broader market and the tech sector itself will impact AAPL’s trading range, but it will not wholly override the company’s economic performance and share prices tend to reflect forward-looking expectations for growth. Apple has the potential to more than double GAAP revenue and quadruple GAAP eps over the next five years. If Apple’s potential to significantly outperform the market can’t be baked into the share price, we would all be better served selling our holdings and buying market indexed mutual funds.

    Personally, I’m staying with AAPL.