The Apple Investor is a daily report from SAI. Sign up here to receive it by email.
AAPL Up On Huge Numbers
The market is a bit shaky in early trading as the EU warns about Greece affecting the broader Union offsets positive earnings announcements. Shares of AAPL are up big on the blowout quarter, however, they have lost a bit of last night’s after-market rally, trading under $400. Catalysts include the next iPhone launch this fall (sometime in this quarter) as well as the possible iPad 3 ahead of the holidays; smartphone adoption in China and other emerging markets (check out quarterly revenue by segment, sales in Asia nearly quadrupled from last year); iCloud rollout and adoption; the continued evolution and next generation of Apple TV; and new platforms such as books / publishing and social (Ping). Shares of Apple trade at 9x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities), low versus historical standards (cheap). Check out our updated Apple model complete with financials and various charts.
Apple Demolishes Wall Street Expectations With Record Revenue (Various)
Here’s what the analysts are saying now:
- Welcome to the post-PC era: Bill Shope at Goldman Sachs reiterated his Americas Conviction Buy rating and raised his P/E-based 12-month price target to $525 from $485 based on the increase to estimates. He did, however, lower his price-target P/E multiple to 15X from 18X, because he believes EPS growth will slow.
- This party is just getting started: Mark Moskowitz at JP Morgan says there appears no end to the upside parade. He thinks the return of the wow factor, easing supply constraints, and pending new product cycles should jettison the fear that had been dogging valuation the last couple of months. He reiterates his Overweight rating and raised his price-target to $525, versus $450 previously.
- Spectacular even by lofty standards: Scott Craig at Bank of America Merrill Lynch remains positive on Apple’s growth potential given its opportunity to gain market share, especially in the PC and handset markets. Apple’s valuation is compelling, particularly based on the upside potential from revenue and earnings growth in the Mac/PC and iPhone segments and from gross margin.
- An iParty in China fuels blowout growth: Toni Sacconaghi at Bernstein Research says that guidance was well below the company’s typically conservative level, with revenue guidance being the weakest in nearly 3 years, and he’s having a hard time justifying it. Apple attributes this to “an expected product transition”, or the next generation iPhone. He raised his price-target to $510.
- Momentum strong: Kulbinder Garcha at Credit Suisse believes that Apple is well-positioned for continued momentum across key product lines owing to a competitive advantage in software, hardware and services/apps ecosystem. This should deliver out-sized revenue and earnings CAGR of 49% and 53%, respectively over the next two years. He reiterates his Outperform rating and price-target of $500.
Here are some more price-target increases.
Apple’s iPad Business Is Bigger Than The Mac Now (Business Insider)
Apple now makes money from the iPad than any other product except the iPhone. The company reported iPad revenues of $6.1 billion on 9.25 million units, ahead of the most optimistic “amateur” estimates of 8.4 million. That’s behind only the iPhone, which took in $13.3 billion. All Macs combined were only $5.1 billion. Overall, iOS products made up more than two-thirds of revenue.
Steve Jobs Doesn’t Think That The Board Is Looking For His Eventual Replacement (AppleInsider)
Members of Apple’s board talked to executive recruiters and at least one “head of a high-profile technology company” to succeed CEO Steve Jobs, according to The Wall Street Journal. Others claim that the conversations weren’t explicitly aimed at recruiting a new chief executive but were more of an informal exploration of the company’s options. And that the directors aren’t acting on behalf of the full board. In response to inquires, Steve Jobs said in an email, “I think it’s hogwash.” And there you have it.
Google Will Make Sure Apple Doesn’t Win HTC Lawsuit (Various via iDygest)
During Google’s Mobile Revolution conference in Tokyo, Google’s executive chairman Eric Schmidt attributed lawsuits to Android’s massive global growth and restated that there are now more than 550,000 Android smartphone activations daily. He also lambasted Apple for responding to Android’s success with legal attacks and “not responding with innovation” and will “make sure” that HTC doesn’t lose its patent infringement suit with Apple. This was, of course, before Apple destroyed earnings.
Apple Store-Opening Spree; One Every 50 Hours For The Next Two Months (Current)
With the retail push, Apple will move from its current total of 330 locations to 363 stores by the end of fiscal 2011, a pace that works out to nearly one opening every two days. And since doors opened on the first store a little more than 10 years ago, the company has had over 1 billion visitors.
New Smartphone Buyers Prefer To Get An iPhone (ChangeWave Research)
ChangeWave Research released a study that shows that of North Americans (89% U.S., 11% Mexico or Canada) expecting to buy a smartphone in the next 90 days, 46% are planning to get an iPhone while only 32% are thinking about an Android phone. Just because Apple hasn’t released a new iPhone in more than a year doesn’t mean demand for the handset is waning (or that people, like myself, aren’t waiting with baited breath for the new one).
Judge Upholds Kodak Ruling Against Apple (Various via iDygest)
The U.S. International Trade Commission ruled that Kodak did not infringe on Apple’s patents, upholding an ITC judge’s decision from May. Details of the ruling are still forthcoming but flat out rejected the idea that Kodak’s camera and imaging technology is borrowed from Apple.