AAPL At $400 Per Share By May: Here’s Why

  • Posted: 22 August 2010 01:29 PM #16

    Mercel - 22 August 2010 03:53 PM

    The Company is all over the map with product strategy, which is not a good sign.

    Well they are having problems deciding where to go next now that they don’t have anyone on the Apple board. wink

    Anyone think that Google’s Google TV announcement was put in place to try and kill off the upgraded Apple TV before it launched? Any more products that Google may be aware of and attempt to preempt?

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  • Posted: 22 August 2010 02:21 PM #17

    Mercel - 22 August 2010 02:38 PM

    Apple will get to $300 the old fashioned way:  It will earn it.

    That wasn’t a glib reference to an old commercial:  The safest way to estimate AAPL share price is assume the current P/E’s and wait for the EPS to produce the $300. 

    Now, if the attached story on PED’s site holds on re: iTV that may make an appearance in September, we might get some P/E expansion WITH EPS.  Read here for Kevin Rose’s latest prediction of new product from Apple

         
  • Posted: 22 August 2010 03:12 PM #18

    Mercel - 22 August 2010 02:38 PM

    P/E doesn’t drive AAPL valuation today, so it’s probably a false assumption that a higher EPS # based on fewer shares from a buy-back would produce a higher stock price.  The stock price would likely sit where it is today, because engineering a higher EPS # by artificial means isn’t going to fool anyone.  And by spending the cash, Apple would have less flexibility to make tectonic-sized moves it has suggested it might. 

    Apple will get to $300 the old fashioned way:  It will earn it.

    Company stock buy backs, when a stock is underpriced based on a DCF model do not artificially create shareholder value. As I demonstrated, it unlocks value (by moving excess capital from cash to equity) and transfers equity appreciation from selling shareholders to future shareholders. This is accomplished without a market cap change. No smoke or mirrors. Basic math. Allocating excess capital properly creates shareholder value, misallocating it destroys it.

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  • Posted: 22 August 2010 03:15 PM #19

    Mercel - 22 August 2010 05:21 PM
    Mercel - 22 August 2010 02:38 PM

    Apple will get to $300 the old fashioned way:  It will earn it.

    That wasn’t a glib reference to an old commercial:  The safest way to estimate AAPL share price is assume the current P/E’s and wait for the EPS to produce the $300.

    That’s correct. We can not assume we’ll see a significant p/e multiple expansion in this market and the cash position also buoys the share price.

    My point is the share price will reach $400 within a year without or without expansion of the p/e multiple based on eps growth alone. If the multiple expands, all the better. But it’s not needed to reach $300 per share before the end of the year or $400 per share by May 2011.

         
  • Posted: 22 August 2010 03:30 PM #20

    DawnTreader - 22 August 2010 06:08 AM

    My latest missive at Eventide.

    I’ve been asked on several occasions to spell out my $400 per share price forecast for May 2011. This is pretty much as easy an explanation as I can make it. Reaching that price target does not require a significant expansion of AAPL’s currently low p/e multiple relative to growth.

    Snippet: The release of the Apple iPad, continuing strong growth in iPhone unit sales, lower effective tax rates, the boost to revenue and the influence on margins from iPad and iPhone accessories sales all combine to push AAPL to $400 per share by May 2011.

    I’m bringing the original post to page 2 of the topic for reader reference.

         
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    Posted: 22 August 2010 04:25 PM #21

    SNIPUS - 22 August 2010 02:55 PM

    If the board would not buy the stock at $78 a share I doubt they would approve $250.

     


    No wiser words have ever been spoken about Apple’s BOD. I don’t know how many times this has got to be beaten around. The BOD receives their options to buy at ridiculously low prices, they do not care what the price is, neither does SJ. When they are granted the options they have a huge gain already built in. Where we as share holders really get the shaft is the constant incremental dilution of shares. :-x If the company would account for the cost of these diluted shares and freeze the share count this pleading would not be necessary. The net effect would be the same as a buy back, just in real time. I have been beating this drum for over 3 years now, nobody hears.

    Robert, have you been drinking the same Kool-Aid as the Sponge? LOL

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    Posted: 22 August 2010 05:38 PM #22

    DT,

    You’re predicting an EPS of $19.90 for the trailing twelve months through the March 2011 quarter using year over year EPS growth estimates of 70%, 67%, and 67% for the next three quarters respectively. But then you’re predicting $23 for fiscal 2011, meaning 40% year-over-year EPS growth in the second half of fiscal 2011. And your article reiterates a $500 target for May 2013, a 25% price increase in two years form your $400 May 2011 target, and assuming a constant PE implies about a 12% annualized EPS growth. Is this decreasing EPS growth an accurate reflection of your expectations through May 2013—a decline from 70% to 67% to 40% to 12%?

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  • Posted: 22 August 2010 06:06 PM #23

    Apple II+ - 22 August 2010 08:38 PM

    DT,

    You’re predicting an EPS of $19.90 for the trailing twelve months through the March 2011 quarter using year over year EPS growth estimates of 70%, 67%, and 67% for the next three quarters respectively. But then you’re predicting $23 for fiscal 2011, meaning 40% year-over-year EPS growth in the second half of fiscal 2011. And your article reiterates a $500 target for May 2013, a 25% price increase in two years form your $400 May 2011 target, and assuming a constant PE implies about a 12% annualized EPS growth. Is this decreasing EPS growth an accurate reflection of your expectations through May 2013—a decline from 70% to 67% to 40% to 12%?

    Very good.  grin

    The goal of the post wasn’t to focus on the what might be considered ambitious growth rates. The estimates are purposely conservative for the sake of demonstrating reasonable growth assumptions over the next three quarters will deliver the shares to $400 without a significant expansion of the p/e multiple.

    On the $500 per share prediction: Moving to $500 per share from $400 per share is much less of a jump in terms of percentage gains than moving from $300 per share to $400 per share. I don’t expect it to take until 2013 to reach $500 per share. But first things first is dispelling the argument that somehow AAPL’s share price is inflated based on the company’s market cap or the nominal share price of around $250.

    As much as I’m not one to advocate stock splits, the nominal $250 share price can cause cognitive dissonance for those who don’t understand the company, its products or its culture.

    I also think the high nominal share price for Google creates the same effect.

         
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    Posted: 22 August 2010 08:13 PM #24

    mbeauch - 22 August 2010 07:25 PM

    Robert, have you been drinking the same Kool-Aid as the Sponge? LOL

    He is gulping it down and swimming in it.wink  I am drinking more water these days, so no 300 predictions for 2010   from me.

    The good news is that you will have more time to work on your golf game.  Robert will still be loved when May comes around and we are nowhere near 400.

         
  • Posted: 22 August 2010 08:23 PM #25

    omacvi - 22 August 2010 11:13 PM

    Robert will still be loved when May comes around and we are nowhere near 400.

    All the more when the price falls by the wayside on the way to a one-half trillion dollar market cap.  :wink:

         
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    Posted: 22 August 2010 08:24 PM #26

    omacvi - 22 August 2010 11:13 PM
    mbeauch - 22 August 2010 07:25 PM

    Robert, have you been drinking the same Kool-Aid as the Sponge? LOL

    He is gulping it down and swimming in it.wink  I am drinking more water these days, so no 300 predictions for 2010   from me.

    The good news is that you will have more time to work on your golf game.  Robert will still be loved when May comes around and we are nowhere near 400.

    Careful Sponge, you might force my hand and offer a wager. I for one do think AAPL gets to $300 before the end of the year.

    As for the golf game, I have not played in months and still believe I could beat you tomorrow.  :-D   I plan on using some Pro V 1’s to do the stomping. LOL

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  • Posted: 22 August 2010 08:58 PM #27

    omacvi - 22 August 2010 11:13 PM

    I am drinking more water these days, so no 300 predictions for 2010   from me.

    As a contrarian indicator, it doesn’t get any better than this!  $300 IS IN THE BAG! 
    :-D

         
  • Posted: 22 August 2010 09:04 PM #28

    Apple II+ - 22 August 2010 08:38 PM

    DT,

    You’re predicting an EPS of $19.90 for the trailing twelve months through the March 2011 quarter using year over year EPS growth estimates of 70%, 67%, and 67% for the next three quarters respectively. But then you’re predicting $23 for fiscal 2011, meaning 40% year-over-year EPS growth in the second half of fiscal 2011. And your article reiterates a $500 target for May 2013, a 25% price increase in two years form your $400 May 2011 target, and assuming a constant PE implies about a 12% annualized EPS growth. Is this decreasing EPS growth an accurate reflection of your expectations through May 2013—a decline from 70% to 67% to 40% to 12%?

    Thanks again for this post.  grin

    I’ll be revising my FY11 forecasts as we enter that fiscal year. The 3rd and 4th fiscal quarters of FY 11 may not realize the same rates of growth over the prior year periods we’ll see in the December and March quarters. There are no prior-year iPad revenue comparisons in the December and March quarters and I expect both quarters to perform close to what we saw in June.

    Moving beyond the March quarter with more deliberate forecasts requires a bit more data. The September quarter results will give some clues on the trend (or change in trend) in Mac sales and the expected fall refresh of the iPod line is also a factor to consider.

    Again, I tend to keep estimates conservative to avoid the focus of discussion turning to a debate on the likelihood of Apple achieving more ambitious results.

    It’s clear to me the share price will rise with earnings. The question is whether or not we will see continued compression of the p/e multiple relative to results.

    Even if the current p/e multiple remains constant, it will represent a further compression of the multiple by a widening gap between the multiple and the then current rates of growth.

    I could make a strong case for the expansion of the p/e multiple to 22 or 23 times trailing 12-month eps by early calendar year 2011 by I’ll save that debate for a later date.

         
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    Posted: 22 August 2010 09:18 PM #29

    Mercel - 22 August 2010 11:58 PM
    omacvi - 22 August 2010 11:13 PM

    I am drinking more water these days, so no 300 predictions for 2010   from me.

    As a contrarian indicator, it doesn’t get any better than this!  $300 IS IN THE BAG! 
    :-D

     

     


    You guys are all   drinking cool aide. :-o   I should point out that I am still all in. if aapl drops by .50 tomorrow I will get a margin call.  Like I said we are still aways from 300 and it is so dependent on the overall market.

    I want a few of you to give me some predictions on where you see the overall market when aapl hits 300 and 400.

    [ Edited: 22 August 2010 09:20 PM by omacvi ]      
  • Posted: 22 August 2010 09:27 PM #30

    omacvi - 23 August 2010 12:18 AM
    Mercel - 22 August 2010 11:58 PM
    omacvi - 22 August 2010 11:13 PM

    I want a few of you to give me some predictions on where you see the overall market when aapl hits 300 and 400.

    It won’t matter.  grin

    Absent a major market move south, AAPL will reach 300 by the end of this calendar year and 400 by May even if current conditions persist. I don’t see a further compression in the nominal p/e multiple as earnings rise, but my forecasts consider a further compression of the p/e multiple relative to then current growth.