THE APPLE INVESTOR: Apple Stock Has At Least 30% Upside Potential

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AAPL Getting Some Relief
Stocks are trading modestly higher Monday morning after the Dow Jones industrial average fell below 12,000 last week for the first time since March. Shares of AAPL are up marginally after being battered this past month. Catalysts include second quarter results released in July; the next iPhone launch this fall (see below); smartphone push into China and emerging markets; 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 10.5x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).

Apple To Build Nearly 400K Next-Gen MacBook Airs This Month (AppleInsider)
Concord Securities analyst Ming-Chi Kuo says that Apple has placed orders for the production of a total of 380,000 Sandy Bridge-based 11.6 and 13.3-inch MacBook Air models this month. Slightly over half of the new MacBook Airs being produced this month are expected to be the 11.6-inch model. Kuo notes that Apple plans to wind down production of existing MacBook Airs this month with a final run of 80,000 units, bringing the total number of MacBook Airs slated for production in June to 460,000.

UAE Carrier Etisalat Said 4G iPhone 5 To Ship This Year (TUAW)
United Arab Emirates-based carrier Etisalat is in talks with Apple to sell a 4G iPhone 5 later this year. Well, at least that’s what Ali Al Ahmad, Chief Corporate Communication Officer, said but Etisalat must have gotten some cranky calls from Apple’s carrier relations team, because the company has officially denied any mention of an upcoming iPhone model. He is quoted as saying, “As the first telecom organisation to roll out the 4G network, LTE, in the Middle East, we have already started talking to them for the handsets and chipsets in them.” Apparently Apple executives are walking around with the next-gen iPhone in their pockets as we speak.

Nokia Could Ship Fewer Smartphones This Quarter Than Apple (Bloomberg)
Nokia may ship fewer handsets than Samsung or Apple this quarter, according to Nomura analysts Stuart Jeffrey. Nokia is busily readying a line of phones based on Microsoft’s Windows Phone 7 operating system to replace the company’s own Symbian line, which is losing out to Apple’s iPhone and Android handsets. Smaller Chinese vendors are also taking share in the $138 billion smartphone market as cheaper components allow them to make devices in the $150-200 range using Android software. That threatens the low-end smartphones and completely prices Apple out of the market.

Spotify Has Three Of The Four Major U.S. Music Labels, Could Come To The U.S. This Summer
(All Things Digital)

Spotify has signed an American distribution deal with Universal Music, making it the third major U.S. record label to sign such an agreement (excluding Warner Music). The pact makes it likely that the European company will finally be able to move across the Atlantic at some point this summer. The service has been incredibly popular in Europe with an almost cult following, offering an “Open” free music streaming service. The service could give iTunes a run for its money.

Apple Has 30% Upside Potential… (Seeking Alpha)
Wall Street has diversified opinions on Apple’s future. The bottom line is 7.2% growth, where the top line annualized growth estimate is 34.1%. Average five year growth forecast estimate is 17.2%. So what is the fair value of Apple given the forecast estimates? Discounted cash flow says $430 and its O-Metrix score is 27% higher than the market average.

…Or More (Seeking Alpha)
Even at today’s multiple of 15.5x trailing 12-month earnings and with continued compression of the non-cash earnings multiple, Apple’s share price can reach above $425 per share after fiscal year end numbers are released in September. Investors should expect the shares to return to an established trading range of 17x – 20x trailing 12-month earnings over the next 60 days and for earnings growth to propel the shares to $590 per share over the next four quarters. Not sure Apple’s valuation should run off of trailing earnings, but ok.

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