Filed under: Analysis / Opinion, Apple Corporate, Apple Financial, Apple
Let's talk AAPL and the future
It's been a roller coaster ride over the past two years for Apple (AAPL) stock. In December 2007 it hit a then-peak of $199.83 a share. Just two months later AAPL sunk to $125. Three months after that it had recovered to the $180s, but by November 2008, AAPL had plummeted to $82 a share. Since then, the stock has recovered and hit an all-time closing high of $207 on November 17, 2009. As of today it's sitting pretty in the $190s -- though some think the drop from the $200s to $190s is suspicious.
I argue with people all the time why Apple didn't deserve its dips and plummets over the last two years: The company is sitting flush with
iPod classic and iPod nano aside (through which Apple has about 80% share of the MP3 player market), Apple has small to minuscule market shares in computers (10%), phones (2%), and tablets (0%). That's to say nothing of the fact that they are now a player in hand-held gaming of which they possessed zero share a year ago.
What do these small market shares mean? Nearly unlimited room for growth. Given how Apple is dominating the mind share of these new markets already, not to mention its incredible sales, it looks like the next three years of AAPL has very little downside. The only reason AAPL dropped so much over the last two years was because of the recession. It had nothing to do with the company. Apple was and is as healthy as could be. It was the recession – and the understandable fear of investing in the economy at large – that drove the stock down.
Today JPMorgan raised its target on AAPL to $230, and after a look at the latest retail data Piper Jaffray's bullish Gene Munster is maintaining his $277 target. Though I generally don't like financial analysts (I mean, monkeys are at least as helpful as most analysts – and a lot less shady), I think $230 is a easy hit. But more so, I believe that AAPL could hit $300 by the end of 2010 and $400 the year later – as long as the bankers can keep their egos in check and avoid another global meltdown.
But that's just my opinion. What do you think? Vote in the poll and give us your thoughts in the comments!
Disclaimer: This author owns shares in AAPL. Opinions in this post are those of the author only and should not be considered as investment advice.
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Reader Comments (Page 1 of 1)
devcoder said 6:29PM on 12-14-2009
And to think that after writing a report on apple's stock for a class when it was $80 and I had said to "BUY! BUY! BUY!" I didn't. FML.
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austin.federa said 11:44PM on 12-14-2009
I did, at $87. Currently 124% investment return. I'm holding on for a while, I really wish I had gotten palm when it hit 3 and sold at the high of like 14. that would have been nice.
Charli said 12:56AM on 12-16-2009
i about died when it got that low. i already owned shares that were bought at just over (I think it was $95) and I was pissed at all the reports of Jobs being on his death bed and the company would be left to idiots, blah blah. and the price plummeted. thankfully I didn't cut my losses. but it was very tempting
Magicpony said 6:40PM on 12-14-2009
Apple has more than $30 Billion in cash
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Benjamin said 7:35PM on 12-14-2009
How do you come up with the 300 and 400 numbers? Just completely out of thin air? Did you look at their financial statements (not just to find out how much cash they have).
The fact that a company has great products and outlook doesn't mean you should be willing to buy at any price. Every day, the price of the stock takes into account the "universe" of possible outcomes for the company. For example, what would happen if the Chinese currency were to appreciate, or demand for high-tech electronics was lower than expected, or flash memory experienced a shortage, etc. Positive outcomes have also been built into the stock price. It's the same thing as people that want to invest in green technology stocks because "it's the way of the future" - they're not the first ones to think that and those stocks are likely to be already at a high valuation...
Just pulling a number because you "feel" it is not the safest investment strategy, methinks...
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Fred_Mulligan said 8:03PM on 12-14-2009
For a guy who's against the theme of an article I happen to agree with, I commend your disposition. You offer a valuable point--one I am positive the large majority of marginal investors in the stock market do not understand.
Most importantly, you weren't a total dick about it. Good show, sir.
jb510 said 4:19AM on 12-15-2009
While he wasn't a dick about it... The author pretty clealy states he bases his belief on how small a share of the market Apple currently holds and the room for growth in those markets. It may not be the best techincally supported reasoning or a price target but it's obviously not being pulled out of thin air.
Personally I don't think apple will increase it's value by 50% over the next year let alone 100% over the next two years. I think the tablet will falter some and I think that there will be at least a 25% drop at some point shortly after the tablet launch. The expectation of the tablet has been prices in for a long time and when it fails to meet ridiculous expectations the Apple's value will correct slightly in the short term. That just gut and experience talking... I regularly trade Apple's stock sometimes long term (usually long), sometimes short term (usually short). I currenty hold 250 shares which were bought at 86.39... that's 130% profit as of today. I will be selling those shares before the end of the year for tax reasons, but I made a bundle shorting Apple last September, but probably won't short Apple in the coming year.. Maybe short term around tablet launch time, but i'd expect to buy I to apple again sometime in around then as well.
Apple NEED to find new markets, there fundemental problem (mind you I think they are brillqntly run, although I do your about Schmidts depature from the board)... Anyway fundmentally they have too much cash because they can't find markets to enter and dominate... I don't mind them being cautious, but they are too cautious and I think Jobs is the reason for that... Both his being super hands on as well as being sometimes absent or ill.
Google on the other hand has been doing this right.. Unabashedly delving into energy and other services. Unafraid to develop hardware (pending phone). Google Is not singularly defined by search and advertising anymore. Sire that's core, but there is so much more.
dave said 8:05PM on 12-14-2009
I'm really glad I spent my entire life savings ($500 at the time) on 19 shares of AAPL in 1997. The stock has split four times since, so essentially I bought 76 shares for $6/share. Still hanging on, $300, here we come!
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Christian said 8:05PM on 12-14-2009
Disclaimer: I own Apple stock; ten shares, to be precise. I don't know why that’s important, but people always seem to make these disclosures. Whatever.
The obvious answer, to me, seems to be that people are selling AAPL to rake in their profits in a season where many other stocks are still languishing. Unless you were in the upper crust of people who bought when the shares were above $175 before the beginning of this year, you've almost certainly made money on Apple stock. Maybe lots and lots of money. People have to buy Christmas presents. Put two and two together.
For my own part, I own Apple stock because the ceiling for Apple's growth is virtually unlimited. I won't bore anybody with my own theories, but the nutshell of it is that I'll be very surprised if Apple isn't the biggest tech company in the world in another decade. For as much as they've done, there's so much they have yet to do. Seems like a good investment to me, although I say that as somebody who knows computers, not stocks, bonds, and economics.
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Frenchman said 8:08PM on 12-14-2009
This article has no basis in anything besides a fanboy's dreams. TUAW, please stick to writing about technology and don't try to do finance. Or if you do, at least try to do a future cash-flow evaluation first.
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Jonathan said 8:39PM on 12-14-2009
Ummm...to the people who are saying the authors $300 and $400 price seems arbitrary you are missing the point. He states the fact that in tests monkeys have picked stocks as well as "learned" analysts. So if his prices come from gut instinct, I belive that is just as valid as the yahoos we watch on CNBC everyday. No one can predict a stock price - even if you "follow the appreciation of Chinese cuurency." In my 25 years of investing I've made a fortune and the only way I've done that is by trusting my gut and ignoring most of the "professional" advice.
It would be interesting to know at what price he bought into AAPL.
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Josh said 10:10PM on 12-14-2009
Jonathan, what kind of research did you do to help form your 'gut' instinct in making your successful stock picks? I'm sure it consisted of doing more than throwing darts at stock listings. On average, analysts may not perform statistically better than monkeys, but individual analysts and investors DO make big bucks, and my hunch is solid research has as much to do with it as dumb luck or cosmic vibes.
Russ said 9:13PM on 12-14-2009
After the Google IPO and their run-up, Apple has adopted their model. There hasn't been any splits, they don't pay dividends, and their profits/market share / cash on hand are only getting larger. With this I can see the speculation for the stock to jump.
I missed out on the big gains a couple years ago so I was sure to jump this time around. I bought 25 at $125 and 75 at $99 and $225 is my magic sell number. I won't be buying more at this price point because I don't have enough money to buy a significant amount more at $200 to make it worth my while. (In my head at least)
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Ji said 12:37AM on 12-16-2009
I'm in and out of AAPL several times now. I sold Mon morning when it opened high at 199. Took profit of almost 60%. (thank you, steve!)
I sold for a couple of reasons:
1) when my dad, who is not an apple nerd, starts babbling about the tablet and AAPL hitting 300 i know it's overvalued since every other guy like my dad has bought in
2) i think the US market in general is overvalued since fundamentals like consumer demand, in/deflation and unemployment are all at alarming levels (take your pick of some other bell-weather market indicators and it's a similar story)... so... we're due for a correction.
3) the coming market correction 10 ~ 20% will also coincide with the tablet release (which i agree will knock AAPL down a bit) and the stock will shed perhaps 30% of its share price and i'll buy back in.
disclosure (LOL!): i am a small-time investor who operates entirely by gut and some dribbles of internet research, but i've done well so far!
Average White Boy said 10:56AM on 12-15-2009
I'm long on Apple, but considering how much attention this stock is getting from the media and supposedly it's strong fundamentals, this stock is looking pretty weak. In late 2007 this stock was at $200. Two years later and this supposedly hot, hot stock is at $195. Apple did nothing wrong. It's been selling iPhones like crazy, opening up stores every couple of weeks, building a huge cash reserve and even gaining a tiny bit of desktop market share. Steve Jobs has pretty much recovered so the media hasn't been able to kill Apple with that angle. There was never a reason for Apple to drop to $80 except because of analysts fears. Apple's sales never fell off like the Windows PC companies did
(I feel sorry for those that listened to some particularly rash idiots at TMO telling would-be investors to mortgage their houses to buy Apple shares before it went to $275 in 2008)
However... Apple is still mired below $200. Amazon is on a tear and Google is slowly moving up every day even without the media and analysts pumping them constantly. There is a huge gap of where Apple is now and the higher projected target prices. It makes little sense to me. I doubt if Apple will ever be a $250 a share company regardless of how many iPhones they sell. I have a feeling large investors just don't trust this company. Maybe Apple's weak price does have to do with investors selling off for Christmas. I don't know. I'm not panicking and still holding. We'll see if the analysts know what they're talking about.
I'd be a lot happier if the share price was over $200 before the end of the year. I'm just not pumped up as much as some overly excited people that insist Apple's share price is suddenly going to skyrocket because of iPhone sales or some accounting change. Good luck to all Apple investors because I think we're going to need a lot of luck to get that share price moving back up.
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drweiss said 12:28PM on 12-15-2009
ohhh yeah, the elephant in the room.
the company is personality "heavy" w jobs, buffet/berkeshire:jobs/apple, and the question is changes in health (or worse) can affect the long term value of an investment.
is the removal of jobs (hey, nobody lives forever..) a buying opportunity or the end of a dream?
d
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