THE APPLE INVESTOR: Here's Why Apple's Stock Is Attractive

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AAPL Trying To Recover With Market
The market started off after a surprising JP Morgan earnings loss, but stocks are currently climbing back up in the positive. Shares of AAPL are also above the flat line by midday. Upcoming events include Tim Cook’s keynote at the D10 Conference on May 29 and Apple’s developer conference (WWDC) is slated to start June 11. Investors remain focused on iPhone penetration globally and the anticipated launch of the next generation iPhone in the fall; iPad adoption; market share growth of the Mac business as well as the upcoming refresh; the introduction of the anticipated Apple TV set; and platforms such as Siri, iAd and iBooks. Shares of Apple┬átrade at 9.0x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).Wall Street Is Freaking Out About Carrier Subsidies, But Might Be Non-Issue (Business Insider)
Katy Huberty of Morgan Stanley put out a 15-page report on Apple and carrier subsidies and seems to conclude that this issue is largely a non-issue. Even if every carrier lengthens the upgrade cycle, Huberty says Apple can still sell 165 million iPhones this year, which is what she’s estimating.

Apple Partner Says iTV Out This Year (Business Insider)
Foxconn CEO Terry Gou confirmed that Apple has begun prepping its long-awaited television and is in the planning stages. Gou’s comments mark the first official acknowledgment from either Apple or its manufacturing partners that a new television is in the works. Foxconn is making preparations for iTV, Apple Inc’s rumoured upcoming high-definition television, although development or manufacturing has yet to begin. This would support previous claims from analysts that the new television won’t likely be released this year, and perhaps not even next year.

All Sorts Of New iDevices Coming According To Report (DigiTimes)
Do you even like reading about all these rumours? According to a report, Pegatron Technology has landed orders for Apple’s sixth-generation iPhone, which is rumoured to launch in September. Separately, Foxconn will be responsible for Apple’s anticipated 7-inch iPad when it arrives in August. That launch as been corroborated by Rene Ritchie at iMore, who has a great track record with Apple rumours. If true, Apple is clearly going after Amazon’s Kindle Fire. Would you buy a smaller, cheaper iPad?

Apple Is The Top Smartphone Manufacturer In Japan, Second In OS (AppleInsider)
Sales of the iPhone in Japan reached 7.25 million units in all of 2011, making Apple the top smartphone vendor in the country. According to MM Research, Apple represented 30% of smartphone sales and 17% of the entire mobile phone industry in Japan. Though Apple was the leading hardware vendor, Google’s Android was the most popular mobile operating system with 69%. So together, Google and Apple controlled a whopping 99% of smartphone sales by platform.

Apple Commits To Help Improve Conditions But What Does That Mean For Margins? (Scoople and Business Insider)
Foxconn CEO Terry Gou revealed that Apple will jointly share the cost of improving the conditions of workers at its Chinese factories, committing to helping improve the welfare of its one million plus workforce. Dozens of major consumer electronics companies make use of Foxconn’s manufacturing services. As such, according to BI Intelligence’s Pascal-Emmanuel Gobry, this is part of a much bigger trend of rising labour costs in China which will affect the entire consumer electronics industry in the form of lower margins. So how will Apple fare? He says the margins might not even be noticeable.

Here’s How Apple’s Stock Gets To $2,000 (Bullish Cross via Fortune)
Analyst Andy Zaky has put together an Apple forecast that looks a few years into the future according to trailing twelve months earnings per share (TTM). Apple is trading at ~14x its current TTM (or 14 x the last four quarters of earnings equals the current share price). According to his earnings estimates, if Apple is still trading at 14x earnings in fiscal fourth quarter 2015, it will have topped $2,000 (or 14 x $145.96 = $2,043.44). And that’s how you get there.

Several Catalysts Still Make Apple Stock Attractive (Seeking Alpha)
At this point, it might make sense to see if, beyond the still attractive valuation, there are still catalysts to sustain and perhaps even propel Apple forward:

  • Apple TV
  • New iPad
  • China
  • iPhone 5

No matter how far Apple has already come, it still has several significant positive catalysts ahead of it and it remains a reasonable investment even in spite of its over-reliance on the iPhone.

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