WebRadio Decibel Amsterdam: Lion's AppleWatch

Sun, 05 Feb 2012 11:35:41 GMT

MacDailyNews:

Apple's iPhone business alone is now bigger than all of Microsoft

“Tech writer MG Siegler just noted a remarkable fact: Apple’s iPhone business alone is now bigger than Microsoft,” Henry Blodget reports for The Business Insider.

“Not Windows. Not Office. Microsoft,” Blodget reports. “Think about that.”

“The iPhone also appears to be considerably more profitable than Microsoft,” Blodget reports. “In the December quarter, Apple’s iPhone business generated $24.4 billion of revenue. Microsoft’s whole company, meanwhile, from Windows to Office to servers to XBox, generated $20.9 billion.”

“The iPhone business generated about $9.3 billion of profit in the December quarter,” Blodget reports. “All of Microsoft, meanwhile, generated only $8.2 billion.”

Read more in the full article here.

MacDailyNews Take: We’re not sure why this story is making a comeback. It’s a Web Echo. (See: Apple's iPhone business alone generates more revenue than all Microsoft – January 25, 2012.) Perhaps it’s simply too good to savor just once.

No matter, we’re always up for rereleases as good as this!

Over seven years ago, when we wrote the following, a lot of people laughed: As we have always said, even as many short-sightedly waved (and continue to wave) the white flag, the war is not over. And, yes, we shall prevail… No company is invincible. Not even Microsoft. – MacDailyNews Take, January 10, 2005

Who’s laughing now?

Fri, 03 Feb 2012 19:37:16 GMT

With 8.7% market share, Apple has 75% of cell phone profits

Between them, Samsung and Apple are sucking up 91% of the winnings

Click to enlarge. Source: Asymco.com

Asymco's Horace Dediu on Friday updated his quarterly review of mobile phone profits, and the news for everybody but Apple (AAPL) just gets worse.

As the iPhone's¬[sgl dagger]share of the market¬[sgl dagger]in terms of units shipped has grown from 3% in second quarter of 2010 to 8.7% last quarter, Apple's share of the profits has swelled from 39% to 75%.

Dediu's chart of the eight largest manufacturers above shows this most clearly.

Only five are seeing any kind of profit at all in mobile telephony. Samsung, with a 16% profit share, comes closest to Apple. Nokia (NOK), Research in Motion (RIMM), and HTC are just scraping by. Motorola (MOT), LG and Sony (SNE), which bought out Ericsson last month, are still in the red.

Remember: We're talking about all mobile phones, not just smartphones. And the entire worldwide market, not just the U.S. This doesn't bode well for the manufacturers who have hitched their wagon to Google's (GOOG) Android or Microsoft's (MSFT) Windows Mobile 7.

For more of Dediu's charts, click here.

Mon, 30 Jan 2012 17:28:38 GMT

Morgan Stanley: 24-36 million more Chinese iPhones in 2013

As the middle class expands, Apple's sales in China could soon reach 60 million per year

Click to enlarge.

Morgan Stanley has seen the future and it's a well-heeled Chinese man (or woman) with an iPhone.

In a note to clients Sunday, Katy Huberty drew on Morgan Stanley's proprietary AlphaWise survey of buying patterns among China's rapidly growing middle class to paint a picture of the smartphone market on the mainland after Apple (AAPL), as widely expected, finally signs deals with China Mobile (CHL) and China Telecom (CHA).

She assumes:

That there are roughly 150 million high-end subscribers in China currently paying at least RMB 100 ($16) per month for mobile phone service.
That China Unicom (CHU), currently Apple's only official carrier, has 15 million of those subscribers, or roughly 10%.
That late this year or early next, Apple will begin selling next-generation iPhones through China Mobile (120 million high-end subscribers) and China Telecom (15 million).
That because 20% of China Unicom's high-end subscribers buy iPhones, the other two carriers' subscribers will follow suit. (8% China Mobile's high-end customers already use iPhones, even though they get only 2G service.)
Assuming 20% penetration, Apple should see, at a minimum, 24 million addition iPhone sales in 2013, adding $6.5o per share to the company's bottom line.
As the iPhone catches on and the middle class expands, that number could grow to nearly 40 million next year, adding $10 to Apple's earnings per share.
Eventually, says Huberty, the iPhone in China will reach penetration levels comparable to those of AT&T (T), where 63% of smartphone customers currently choose iPhones.
In Morgan Stanley's bull case scenario, Apple within a couple of years will be selling an additional 57 million iPhones per year in China alone.

To put that in perspective, Apple sold 68.5 million iPhones worldwide in fiscal 2011, although with the launch of the iPhone 4S in October it sold more than half that many (37 million) in just one quarter.

Below: Part of the crowd that showed up at one of Apple's Beijing stores for the launch of the iPhone 4S.

Thu, 26 Jan 2012 13:31:55 GMT

5 Reasons Apple Is Currently Cheap

Apple performance over the past five years can be described as none other than spectacular, and the news keeps getting better. On Thursday, Apple reported first quarter earnings (excluding items) of $13.84 per share. A year ago, AAPL was delivering $6.37 per share. This is a doubling of quarterly earnings in only one year. This level of success is unparalleled, but that is not why AAPL is such a hot stock to own. The reasons lie in the fundamentals that illustrate that not only is AAPL performing well now, but also that AAPL is poised to continue to gain market share, build new products, and bring down competitors.

Here Are Five Reasons AAPL is Currently Cheap:

1. Cash Reserves: In business, money is king but in tech, people are. The ideas that flow through Silicon Valley are what allow AAPL to continue to innovate and lead the pack in regards to performance. What allow these ideas to be born are the capital reserves that AAPL is currently holding of $97.5 billion. This level of cash on hand will allow AAPL to create new products, but from an investor prospective makes the stock one of the safest in the world.

Ben Hopper from Venture Beat stated that "Apple can afford to fight this battle as well or better than any other company." Hopper goes on to question whether AAPL is utilizing its capital. When AAPL does, their largest rivals Google (GOOG) and MSFT should prepare for losing more market share. As a reference, Microsoft (MSFT) has half of AAPL's current cash-reserves on hand. This differential yields long-term stockholder stability: something everyone wants.

2. Market Position: One of the greatest attributes of AAPL is that it still doesn't have the market share of MSFT in computers or Google in mobile devices. This provides an exceptional opportunity for growth, even if some believe their fire is bound to run out. It is reported that AAPL has 10.7% (see graph below) of the personal computer market and roughly 28.7% of the smartphone market. Analysts have stated recently that MSFT is not likely to be able to build a great mobile device.

This type of sentiment makes AAPL even more attractive because the barrier to entry in the smartphone sector is so difficult. If AAPL's largest competitor, MSFT, is unable to break into that market, AAPL's growth prospects elevate. With the level of cash mentioned above, AAPL is in a phenomenal position to grow to new heights.

click to enlarge

(Apple US Market Share Trend: 1Q06-2Q11)

3. PEG Ratio: A company's price/earnings to growth ratio is a foolproof way to measure how a stock is valued. Many believe that because AAPL is trading at $450 per share that it must be overvalued and that the stock price must be built upon hype. This is simply not true in the case of AAPL. Currently, AAPL has a forward PEG ration of .57. To put this in perspective, MSFT's PEG is 1.15 and AAPL's is .82. This differential shows that compared to its largest tech rivals, it is undervalued and could easily soar above $500.

Low Valuation: This PEG ratio points to AAPL being undervalued, trading at 11.7 times earnings.

4. Promise of Ideas: Tim Cook, successor to the late Steve Jobs, stated at the company's earnings reslease: "We're thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs… "Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline." AAPL is not a company to come out and say that new products are on their way when they are not. Traditionally, AAPL has set relatively low expectations for itself and outperformed earnings and expectations (evidence by Thursday's results.) This statement by Cook should not be taken lightly and should be an indication of future innovation. Even without a new product line, AAPL is in an exceptional market position.

5. Perception Becomes Reality: If it is unthinkable that AAPL could gain any more momentum, think again. Howard Silverblatt, a S&P's senior index analyst, estimated on Tuesday that AAPL's market cap could open today at $427.5 billion, placing it as the largest company in the United States. Many may see this as a point to take a step back because AAPL has preformed so well, but this is not true. When John D. Rockefeller formed the Standard Oil Company in 1870, no one would have thought that today it would consist of several companies with a total value of nearly $1 trillion. This momentum makes AAPL growth and future success imminent because individuals and businesses from around the world will catch on to the rise of AAPL if they haven't already. This will further perpetuate the cycle of AAPL taking over the top stop in nearly all computing devices.

(CNBC)

Conclusion: For the multitude of reasons aforementioned, AAPL is in a position to continue to grow and gain market share, cash reserves, and maintain long-term stability. If AAPL begins trading at its proper valuation, the stock will rise dramatically, and $500 shares of AAPL may just seem reasonable.

Thu, 26 Jan 2012 13:17:13 GMT

Wowed Wall Street watchers raise forecasts after Apple's 'perfect' $46B quarter

Analysts on Wall Street were blown away by Apple's blistering holiday 2011 quarter, and promptly revised their estimates even higher following the news.

Apple's first quarter of its fiscal 2012 was so good, analyst Brian Marshall called it "the perfect quarter." Other analysts weighed in with descriptions including "supersized," "exceptional" and "iDominance."

Analysts also took the opportunity to increase their price targets for AAPL stock, with the most bullish of forecasts now calling for it to hit $670.

Piper Jaffray

Analyst Gene Munster has the highest price target amongst his peers, with the $670 forecast. AAPL is his top pick for 2012, as Apple's success is "a market expansion story as well as an upgrade cycle story."

While Munster was impressed by Apple's holiday quarter, he sees it as a precursor to 2012, which he previously said will be a "monster" year. He expects the "true force" of Apple's December quarter will be felt throughout calendar year 2012.

Munster also said that though investors getting numb to Apple's impressive results, he expects earnings revisions will move higher faster than the iPhone maker's declining earnings multiple.

"For the last eight years, Apple has been blowing away analyst estimates," he wrote. "Last night's $7B revenue upside was particularly impressive given it equaled Apple's total revenue for the Jun-08 quarter. While we are raising our earnings numbers for (calendar year 2012) by 24%, shares of AAPL were only up 8% in the aftermarket."

ISI Group

"The perfect quarter," in Marshall's eyes, was due to the fact that the iPhone and iPad generated about 85 percent of Apple's total gross profits. This helped the company beat its revenue guidance by about $9.3 billion and earnings per share guidance by $4.60.

"With minimal 'real' competitive threats to AAPL's major product families in (calendar year 2012), we believe the outlook for the next 4 quarters can be characterized as 'smooth sailing,'" Marshall wrote. "In our view, if something were to go wrong with the story, it would most likely result from idiosyncratic mis-execution on the part of AAPL or a material change in support from the global carrier community."

But Marshall said that's unlikely given Apple's historical track record. He expects an iPad 3 launch in March and a sixth-generation iPhone to arrive in the September-October timeframe to go smoothly.

Marshall also said that Apple possesses a revenue stream similar to a cable company, as though users are iOS "subscribers," but he still doubts that the market will apply a "full valuation" to the company and give it a decent price-to-earnings multiple.

Because of that, he's applied a 12-times multiple to his new calendar year earnings per share estimate of $41.50, up about 9 percent from his previous projection of $39. Adding in 25 percent credit of net cash, he arrived at a new price target of $525, up from $500.

The growth trajectory of Apple's cash hoard, via Asymco.

UBS

"Let me get a Q1... supersized," analyst Maynard Um joked. With Apple firing on all cylinders to end 2011, he said it's set up the company nicely for another strong performance in 2012.

"The magnitude of the upside is quite impressive," he said. He sees iPhone demand carrying into the March quarter, while an impending third-generation iPad launch will continue to drive growth.

And those trends will carry Apple into the fall of 2012, when the company is expected to introduce its next iPhone. UBS has maintained its buy rating for AAPL stock, and has a price target of $550.

Needham Research

Analyst Charlie Wolf was at a loss when trying to describe Apple's holiday quarter: "There is no other way to describe it. Apple crushed its first quarter."

He was most impressed by Apple's 110 percent increase in iPhone sales to 37 million, which easily bested his forecast of 32 million units. He also said that sales of 15.4 million iPads "put to rest the notion that underpriced and underpowered compelling tablets would have any affect on iPad sales."

Wolf also noted that with 5.2 million Macs sold last quarter, quarterly Mac sales now exceed annual Mac shipments through 2005.

He also took note of Apple's growing cash hoard, which is now worth nearly $100 billion. Wolf is hopeful that Apple Chief Executive Tim Cook will offer investors some sort of dividend out of its cash and reserves.

Needham Research has set a 12-month price target for AAPL stock of $540. Wolf said the major risk in the company's story is whether it can continue to innovate at the same rapid pace for years to come without late co-founder Steve Jobs at the helm.

Morgan Stanley

Beyond product upgrades like the next iPad and a future iPhone, analyst Katy Huberty sees Apple's distribution in China as a major part of its growth going forward. She believes Apple will ink a deal with China Telecom for the iPhone in the near future, while China Mobile will also come on board in late 2012 and early 2013.

"Adding the additional carriers in China helps open up access to the 150M high-end subscribers, 80% of which are on China Mobile's network," she said.

Morgan Stanley has maintained its "overweight" rating for AAPL stock with a price target of $515, though the firm's "bull case" scenario calls for the company's stock to hit $600.

RBC Capital Markets

"iDominance!" declared analyst Mike Abramsky, who raised his price target to $600 from $525 after Apple easily bested his projected iPhone sales of 32 million.

He also noted that Apple now has $104 per share in cash, after having its operating cash flow increase by $17.5 billion in the holiday quarter.

Abramsky sees Apple selling 81.4 million iPhones, 33.4 million iPads and 25.8 million Macs in the company's fiscal 2012. With a projected $160.7 billion in revenue, he sees the company growing 48.5 percent this year.

Deutsche Bank

Analyst Chris Whitmore has increased his price target for AAPL to $600 from $530. He said Apple's new product portfolio remains "incredibly strong" with new iPhone and iPad models expected this year.

"In addition, we expect Macs with Ivy Bridge should support incremental gains and Apple TV appears set to graduate from an 'Apple hobby' later this year," he wrote. "We anticipate an iOS device with Siri user interface and iCloud syncing has the potential to redefine the smart TV category in the same way the iPhone and iPad impacted the smartphone and tablet markets, respectively."

As for the third-generation iPad, Whitmore said he believes it will arrive early this year while the rest of the industry is refocusing its efforts on Windows 8-based tablets. That will give Apple even longer to extend its lead over the competition.

Sterne Agee

With a new price target of $550 (from $540), analyst Shaw Wu believes Apple remains in a position to outperform in a tough macro-econonmic environment. He has forecast $156.4 billion in revenue from Apple in its fiscal year 2012 with $43 in earnings per share.

Looking beyond to fiscal 2013, he sees Apple with $175.7 billion in revenue and $48 earnings per share.

Evercore

"That's a lotta iPhones," analyst Robert Cihra said to kick off his note to investors. He said Apple's guidance for the March quarter looks conservative, as usual.

"But we see demand plus supply-chain momentum continuing to look strong across iPhone cycling (e.g., incremental geo/carrier launches), upcoming refresh of iPad (March) and MacBook Air," he wrote.

Cihra reiterated his "overweight" rating for Apple stock, and increase his price target to $650, from $600. He sees Apple netting revenues of $161 billion in fiscal 2012, up 49 percent year over year.

JMP Securities

Despite Apple's blowout quarter, analyst Alex Gauna has maintained a "market perform" rating for Apple. Gauna admitted it's "embarrassing" for him to have that rating for such a "powerful result," but said he's electing to remain on the sidelines for now, "given the risk of this proving to be a peak margins and growth quarter."

Gauna also cited "elevated litigation uncertainty" and "management transitions" as factors that could hurt Apple going forward. JMP Securities does not have a target price set for AAPL.

Tue, 24 Jan 2012 22:07:31 GMT

Boom...! - Both Apple's revenues and profits were twice as high as Microsoft reported for the same holiday quarter.

Apple stuns Street with massive $46.33 billion record revenue; all-time record Mac, iPhone, iPad sales

AAPL hits 468 in after hours

Apple today announced financial results for its fiscal 2012 first quarter which spanned 14 weeks and ended December 31, 2011. The Company posted record quarterly revenue of $46.33 billion and record quarterly net profit of $13.06 billion, or $13.87 per diluted share. These results compare to revenue of $26.74 billion and net quarterly profit of $6 billion, or $6.43 per diluted share, in the year-ago quarter. Gross margin was 44.7 percent compared to 38.5 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter's revenue. The Company sold 37.04 million iPhones in the quarter, representing 128 percent unit growth over the year-ago quarter. Apple sold 15.43 million iPads during the quarter, a 111 percent unit increase over the year-ago quarter. The Company sold 5.2 million Macs during the quarter, a 26 percent unit increase over the year-ago quarter. Apple sold 15.4 million iPods, a 21 percent unit decline from the year-ago quarter. "We're thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs," said Tim Cook, Apple's CEO, in a statement. "Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline." "We are very happy to have generated over $17.5 billion in cash flow from operations during the December quarter," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the second fiscal quarter of 2012, which will span 13 weeks, we expect revenue of about $32.5 billion and we expect diluted earnings per share of about $8.50." Trading in AAPL shares has been halted in after-hours trading. Apple shares to resume trading at 4:50pm ET. Apple will provide live streaming of its Q1 2012 financial results conference call beginning at 5:00pm ET which MacDailyNews will cover with live notes. Check our home page at 4:55-ish for the live conference call coverage. According Thompson Financial, the analysts' consensus called for $38.85 billion in revenue and $10.08 EPS. On October 18, 2011, Peter Oppenheimer, Apple's CFO, gave Q112 guidance of "revenue of about $37 billion" and "diluted earnings per share of about $9.30."

Notes of interest from Apple's Q1 2012 conference call

Apple on Tuesday posted a massive holiday quarter with record sales of more than 37 million iPhones, 13.5 million iPads and 5.2 million Macs. Following the news, Apple executives participated in a conference call with analysts and the press, and notes of interest follow.

Participating in Tuesday's call was Apple Chief Executive Tim Cook, Chief Financial Officer Peter Oppenheimer, and Treasurer Barry Whistler.

Highlights

Apple ended the quarter with $97.6 billion in cash, an increase of $16 billion from the previous quarter.
Oppenheimer said Apple executives are "actively discussing" potential uses for its massive cash hoard, but there are no specifics to share. But the CFO did say that the company is "not letting it burn a hole" in their pockets.
Cook said Apple made a risky bet on the high side for iPhone sales, and even that came short of actual sales. "As it turns out, we didn't bet high enough," Cook said. "Our customers are loving iPhone, and we're very happy with that."
1.5 million iPads already in use in education.
Cook said there will come a time when the tablet market is larger than the PC market. Tablets already exceeded desktop PC sales in the U.S. last quarter, based on the latest data from IDC.
Cook doesn't see "limited function" tablets like the Amazon Kindle Fire being in the same category as the iPad. He said Amazon and others will probably sell a "fair number" of units, but people who want an iPad won't settle for the limited function.
More than 600,000 copies of iBooks Author have been downloaded since it was announced last week.
More than 3 million downloads of the iTunes U application for iOS since last week.
iCloud has more than 85 million customers.
There are now 550,000 applications available for iOS, including more than 170,000 for iPad.
A favorable component environment led to high gross margins of 44 percent, even in the face of a hard drive shortage. Cook believes that favorable component environment will continue going into the next quarter.
Cook on the acquisition of flash memory maker Anobit: "Anobit has Fantastic technical talent. We're really fortunate to have them join us."

Apple's iPhone business

iPhone unit sales were up 128 percent year over year, and revenue saw a 133 percent increase from the first fiscal quarter of 2011.

The quarter ended with about 6 million iPhones in the channel at the end of the quarter.

"Nearly all of the top companies in the Fortune 500 now approve and support iPhones on their networks," Oppenheimer said.

Companies are developing and deploying "mission critical apps" specifically for their employees.

New companies supporting the iPhone include Credit Suisse, Kimberly Clark, St. Jude Medical, Nike and Facebook.

Cook said Apple made a risky bet on the high side for iPhone sales, and even that came short of actual sales.

"As it turns out, we didn't bet high enough," Cook said. "Our customers are loving iPhone, and we're very happy with that."

Cook said the iPhone 4S was the most popular iPhone model during the quarter, beating out the also-available iPhone 4 and iPhone 3GS.

Demand in China has been "staggering." Apple saw strong iPhone sales even in the last quarter, when the iPhone 4S hadn't launched.

Apple's iPad business

The iPad saw a 111 percent increase in unit sales from holiday 2010 to holiday 2011. Revenue from the iPad also saw a 99 percent increase year over year.

iPad was "extremely popular" with holiday buyers, Oppenheimer said, and the company remains excited about the market opportunity.

iPad sales exceeded Apple's expectations, with sell-through exceeding sell-in by about 200,000 units.

"Unprecedented" iPad adoption in business, Oppenheimer said. Nearly all top Fortune 500 companies are actively using iPads.

iPad is also "extremely" popular with students and teachers. 1.5 million iPads already in use in education.

Cook looked at weekly data after the Kindle Fire launch. Not an "obvious effect" on the numbers for iPad plus or minus.

There is "clear" cannibalization of the Mac by the iPad. But he thinks that there's a lot more cannibalization of Windows PCs by the iPad, which makes it a trend he's fine with.

Apple's App Stores

More than 600,000 copies of iBooks Author have been downloaded since it was announced last week.

More than 3 million downloads of the iTunes U application for iOS since last week.

iCloud has more than 85 million customers

550,000 applications available for iOS, including more than 170,000 for iPad.

The App Store has now paid out over $4 billion to developers.

Cook said there will come a time when the tablet market is larger than the PC market.

Tablets already exceeded desktop PC sales in the U.S. last quarter, based on the latest data from IDC.

Doesn't see "limited function" tablets like the Amazon Kindle Fire being in the same category as the iPad. He said Amazon and others will probably sell a "fair number" of units, but people who want an iPad won't settle for the limited function.

Apple's Mac business

Mac desktop sales were up 21 percent year over year, while revenue saw a 12 percent increase.

The MacBook lineup saw even more growth of 28 percent in unit sales, while revenue grew by 22 percent.

Mac sales growth of 26 percent compared to zero growth overall for the entire PC market. Oppenheimer said average weekly Mac sales were up strongly across the quarter.

Oppenheimer cited the MacBook Pro, MacBook Air and iMac as the company's top sellers.

Hard drive prices were higher in the quarter because of the flooding in Thailand. That's expected to continue going into the next quarter, Cook said.

Apple TV business

Apple TV is doing "very well," Cook said, with a bit above 2.8 million units sold last fiscal year. 1.4 million of those came in the most recent quarter.

"We continue to add things to it," Cook said. "If you're using the latest one, I don't know about you, but I couldn't live without it.

Apple's iPod business

iPod unit sales were down 21 percent year over year, with a 26 percent decline in revenue.

Oppenheimer said total iPod sales were ahead of Apple's expectations. iPod U.S. market share remains over 70 percent.

The iPod touch accounts for more than half of all iPod sales.

The CFO revealed that there were more than 140 million downloads of apps and content on Christmas Day.

Apple's regional business segments

Apple saw its largest overseas growth in Japan, where revenue was up 148 percent from the same period in 2010.

Apple's second largest region for revenue growth was the Americas, were revenue was up 92 percent year over year.

Now more than 130,000 points of sale throughout the world, up 35 percent year over year.

After China, Cook sees Brazil as a country where Apple could see major growth in the coming years. He doesn't expect Apple to expand its retail presence into Brazil in the near future however.

Apple's retail business

New EasyPay checkout process with personal pickup have made it much easier for customers and Apple's retail employees.

110 million people visited Apple's stores last quarter. On average, the stores see 22,000 visitors per week.

Fri, 20 Jan 2012 12:18:13 GMT

Simply amazing...

Apple Unveils Software To Reinvent the Textbook

See full video of the Apple presentation here

Fri, 20 Jan 2012 11:46:01 GMT

CNN Money:

At $400 billion, Apple is worth more than Greece

NEW YORK (CNNMoney) -- Apple's value on the stock market briefly rose to $400 billion on Thursday, a record high for what was already the world's most valuable technology company.

The company's market cap slipped below the $400 billion mark by midday as Apple's stock fell back from the all-time high of $431.37 it set earlier in the morning. Shares ended the day slightly down, leaving Apple with a $398 billion market value.

Still, that puts Apple in some pretty exclusive territory. Only Exxon Mobil has a higher valuation, at about $420 billion. PetroChina is Apple's closest competitor, at $270 billion, and Microsoft follows at $235 billion.

Apple's market cap is higher than the gross domestic product of Greece, Austria, Argentina, or South Africa. (For more comparisons, check out this excellent blog: Things Apple is Worth More Than.)

Despite its size, Apple is still one of the fastest growing technology companies. The company will report its finances for the past quarter next week, and analysts expect Apple to announce that its sales grew by 45% compared to last year, according to a survey conducted by Thomson Reuters.

Apple's financial empire

Unsurprisingly, Apple topped CNNMoney's survey of technology analysts about the best tech company to invest in for the future. Choosing Apple for the prestigious spot as one of the Four Horsemen of Tech, respondents noted that Apple is a frontrunner in the smartphone revolution. Its iPad created a new category of mobile computing, and Apple has embraced cloud computing with its high-profile iCloud.

Apple's growth is a stunning achievement for a 35-year old company that had a market cap of just $10 billion a decade ago.

The company's turnaround began with the launch of the iPod, and growth really skyrocketed after the iPhone's release in 2007. Apple is forecast to have sold a record 30 million iPhones last quarter, following the launch of the iPhone 4S in October.

Apple on Thursday announced three new initiatives to reinvent the textbook, including the ability to create and publish searchable, updatable and interactive e-textbooks for the iPad. The company also released a publishing tool for secondary school curriculums and instituted a $15 price cap for e-textbooks on the iBookstore.

Wed, 18 Jan 2012 12:32:34 GMT

Apple to announce 'GarageBand for eBooks' to 'digitally destroy' textbook publishing

Apple is slated to announce the fruits of its labor on improving the use of technology in education at its special media event on Thursday, January 19. While speculation has so far centered on digital textbooks, sources close to the matter have confirmed to Ars that Apple will announce tools to help create interactive e-books—the "GarageBand for e-books," so to speak—and expand its current platform to distribute them to iPhone and iPad users.

Along with the details we were able to gather from our sources, we also spoke to two experts in the field of digital publishing to get a clearer picture of the significance of what Apple is planning to announce.

So far, Apple has largely embraced the ePub 2 standard for its iBooks platform, though it has added a number of HTML5-based extensions to enable the inclusion of video and audio for some limited interaction. The recently-updated ePub 3 standard obviates the need for these proprietary extensions, which in some cases make iBook-formatted e-books incompatible with other e-reader platforms. Apple is expected to announce support for the ePub 3 standard for iBooks going forward.

GarageBand for e-books

At the same time, however, authoring standards-compliant e-books (despite some promises to the contrary) is not as simple as running a Word document of a manuscript through a filter. The current state of software tools continues to frustrate authors and publishers alike, with several authors telling Ars that they wish Apple or some other vendor would make a simple app that makes the process as easy as creating a song in GarageBand.

Our sources say Apple will announce such a tool on Thursday.

And Inkling CEO Matt MacInnis agrees that such a move would be very likely. MacInnis previously worked on education projects at Apple before leaving the company in 2009 to pursue his own ideas about creating interactive digital books. Inkling currently offers a variety of digital textbooks with interactive features, including the ability to share notes with classmates and instructors, via an iPad app.

"When you think about what Apple is doing... they are selling tens of thousands of iPads into K-12 institutions," MacInnis told Ars. "What are they doing with those iPads? They don't really replace textbooks, because there's not very much content on offer," he said.

Don't expect that content to come directly from Apple, however. "Practically speaking, Apple does not want to get into the content publishing business," MacInnis said. Like the music and movie industries, Apple has instead built a distribution platform as well as hardware to consume it—but Apple isn't a record label or production studio.

But what Apple does provide is industry-leading tools for content production, such as Logic or Final Cut Pro, to help create content. The company also produces tools like GarageBand or iMovie that make such production accessible to a much wider audience.

Will Apple launch a sort of GarageBand for e-books? "That's what we believe you're about to see," MacInnis told Ars (and our other sources agree). "Publishing something to ePub is very similar to publishing web content. Remember iWeb? That iWeb code didn't just get flushed down the toilet—I think you'll see some of [that code] repurposed."

Mobile, social learning

Technology-in-education expert Dr. William Rankin also believes digital books will expand with tools that will enable social interactions among textbook users. Rankin, who serves as Director of Educational Innovation of Abilene Christian University and has extensively researched the use of mobile devices in the classroom, was one of three authors of a white paper on the effects of digital convergence on learning titled "Code/X," published in 2009.

In that document, Rankin and his colleagues laid out their vision for the future of learning, which included an always-on, always-networked digital device called a "Talos." That device turned out to be very similar to the iPad that Apple announced just six months later.

"What we saw coming was a change in the kinds of places that learning would happen," Rankin told Ars. Since the device would always be with the student, it would give her access to information anytime and anywhere. "For that, you need a different kind of book."

Such digital texts would let students interact with information in visual ways, such as 3D models, graphs, and videos. They would also allow students to create links to additional texts, audio, and other supporting materials. Furthermore, students could share those connections with classmates and colleagues.

"What we really believe is important is the role of social networking in a converged learning environment," Rankin told Ars. "We're already seeing that in Inkling's platform, and Kno's journaling feature. Future digital texts should allow students to layer all kind of other data, such as pictures, and notes, and then share that with the class or, ideally, anyone."

Exactly how what Apple announces on Thursday will impact digital publishing isn't certain, however.

"Think about how meaningful simply authoring and publishing to an iPad will be for K-12," MacInnis said. "However, it might not be great for molecular biology."

MacInnis sees Apple as possibly up-ending the traditional print publishing model for the low-end, where basic information has for many years remained locked behind high textbook prices. Apple can "kick up dust with the education market," which could then create visibility for platforms like Inkling. This could then serve as a sort of professional Logic-type tool for interactive textbook creation complement to Apple's "GarageBand for e-books."

"There will be a spectrum of tools and consumers, and we will continue to fit on that spectrum," MacInnis opined. "I don't know if the publishing industry will react to it with fear or enthusiasm."

Steve Jobs' pet project

We know that former Apple CEO Steve Jobs was working on addressing learning and digital textbooks for some time, according to Walter Issacson's biography. Jobs believed that textbook publishing was an "$8 billion a year industry ripe for digital destruction."

According to our sources close to his efforts, however, Jobs' personal involvement was perhaps more significant that even his biography purports. Jobs worked on this project for several years, and our understanding is that the final outcome was slated to be announced in October 2011 in conjunction with the iPhone 4S. Those plans were postponed at the last minute, perhaps due to Jobs' imminent death.

Despite the delay, however, ACU's Rankin believes the time is right for a change to happen in the field. "We're headed toward a completely digital future at ACU," he told Ars. "A recent study showed that 82 percent of all higher education students nationwide will come to campus with a smartphone. We need to have resources and tools ready for these mobile, connected students."

Tue, 10 Jan 2012 12:11:23 GMT

From MacDailyNews:

NPD: Apple iOS market share jumps from 26% to 43%, Android plummets from 60% to 47%

According to a new report from research firm NPD, iOS's U.S. market share (by sales) jumped from 26% in the third quarter of 2011 to 43% by October and November,” Sarah Perez reports for TechCrunch. “[Android had] 47% market share during those two months, down from 60% in Q3… Former leader RIM's sales tanked from over 20% in Q3 2010 to just 6% in October/November 2011.”

“Says NPD, over the course of 2011, the smartphone battle saw iOS and Android distancing themselves from the competition, turning it into ‘a two-horse race,’” Perez reports.

MacDailyNews Take: Secretariat and his brain-damaged clone.

Perez continues, “Nine of the top ten phones sold in Oct/Nov are smartphones, with Samsung, HTC and Motorla each having at least one smartphone listed in NPD's top ten. Apple's phones are on the top of the list, with the iPhone 4S in the number one spot and the iPhone 4 still doing well in the #2 position.”

Read more in the full article here.

MacDailyNews Take: As Steve would say, “Boom!”

It’s no wonder that Samesung was forced to run ads designed to keep the Android settlers stuck in fragmented-land.

Can’t wait to see December’s numbers!

Fri, 06 Jan 2012 15:49:58 GMT

Report: Apple to launch a full HD iPad 3 in March, followed by iPad 4 in October

A new report today claims Apple is gearing up to release a next-generation “iPad 3″ with a “full HD display” in March, followed by an “iPad 4″ in October. The report comes from Asian supply chain watcher Digitimes who is once again citing Taiwanese industry sources.

According to the report, iPad 3 will sport a QXGA display (1,536 x 2,048 pixel) and improved battery life, but otherwise hardware specs will remain largely unchanged. The launch of iPad 3 in March will apparently see the current generation iPad 2 receive a price cut to $399:

The iPad 3 will come with a QXGA (1,536×2,048 pixels) display and longer battery life although its other hardware specifications may not be so amazing as expected, said the sources. But Apple will take the advantage of the iPad 3 launch to slash the price of its iPad 2 to US$399, the sources claimed.

Digitimes claims that Apple will drop another 9.7-inch iPad dubbed “iPad 4″ by October. That device is expected to have “killer applications”, all-around upgraded hardware specs, and “integrated applications so as to compete with an array of Android-, Wintel- or WoA (Windows on ARM)-based tablet PCs”.¬[sgl dagger]Previously¬[sgl dagger]the publication¬[sgl dagger]claimed Apple had a 7.85-inch iPad¬[sgl dagger]in the works for a late 2012 launch, which their sources later claimed would no longer be happening.

As of latest reports from last month, Digitimes said the next-generation iPad is expected to double its current battery capacity to approximately 14,000mAH. That report also backs up the upgraded resolution mentioned today.

Last night we reported that Jeremy Horwitz of iLounge had tweeted multiple details regarding a next-gen iPad from what he believes are reliable sources. Horwitz claims the next iPad will receive a much improved camera system with a FaceTime HD camera on the front, and backside cam comparably to the lens on iPhone 4S and 4. He also backed up earlier claims that the new iPad may have to be slightly thicker to accommodate upgraded components. Like Digitimes, Horwitz’s sources believe the iPad 3 will launch in March, while the iPad 2 will get bumped down to $399.

Fri, 23 Dec 2011 14:10:32 GMT

Apple Should Trade $607: Gene Munster

He's probably the most notorious Apple bull on the Street, but Gene Munster's upside expectations for Apple stock (NASDAQ: AAPL - News) are eye-popping, even for him.

His price target is $607.

If you follow the tech sector at all - Munster's Apple optimism comes as no surprise. You probably even expect his overweight rating - after all he often expounds on the company's virtues and must have gadgets.

But $607? Considering the stock was slightly below $400 at the time of writing that's a big move.

But Munster is resolute.

"I'm expecting shares to be driven by new product roll outs," he says. "In 2012 there will be new hardware on iPads and iPhones and we believe a new Apple TV is coming late in the year."

In fact, Munster thinks Apple TV alone will be very exciting if not a game changer - for both gadget gurus and the stock.

"We're hearing it has DVD, Internet and gaming integrated into a seamless experience," he says.

And equally important, Munster is expecting Apple to do something with all that cash they have on the balance sheet.

"By next year, Apple will have $120 in cash and they'll have to do something," he says. "I don't think they'll buy back but I do think they'll issue a one time dividend."

Add up all the catalysts and Munster says although his firm has 12 picks for 2012, of them all Apple is the best.

Thu, 15 Dec 2011 14:55:46 GMT

Morgan Stanley: Apple may sell 190 million iPhones next year

A proprietary survey finds demand for iPads and iPhones much stronger than expected

Click to enlarge.

The results of an Alphawise survey of U.S. consumers conducted for Morgan Stanley the week after Thanksgiving was full of surprises, reports Katy Huberty in a note to clients issued late Wednesday.

iPhones are selling surprisingly briskly. Based on the survey and last week's comments from AT&T (T), Huberty estimates that Apple (AAPL) could ship anywhere from 31 to 36 million iPhones this quarter -- as much as 20% higher than the 30 million she's modeling and nearly 30% higher than the 28 million Wall Street is expecting.
iPhone demand is accelerating. "Surprisingly," she writes, "US consumers expect to buy more iPhones in C1Q12 than C4Q11" (emphasis hers). Even discounting the survey results 10%, that suggests Apple could sell 13 million iPhones in the U.S. and 41 million worldwide next quarter. Morgan Stanley's model has Apple selling 30 million iPhones¬[sgl dagger]in calendar Q1 2012.
"Perhaps most surprising," demand for tablets shows no sign of weakening. Only 8% of US consumers own a tablet today but 27% plan to buy one, according to the survey. If, as Huberty expects, Apple gives up "a modest" 4 points of market share to Amazon's (AMZN) Kindle Fire, Apple could sell 81 million iPads worldwide next year. Morgan Stanley is modeling only 52 millon iPads for 2012, roughly 20 million in the U.S. and 32 million overseas.
With a $100 price cut Apple could sell 15 million more iPads. Even after applying a 30% discount to the survey results (where does she get these numbers?), Huberty estimates that if Apple were to reduce the price of the cheapest iPad 2 to $399, it could sell 90 million iPads worldwide in 2012, roughly 10 million more than its suppliers have reportedly been asked to build.

Mon, 12 Dec 2011 13:54:45 GMT

Analyst: Strong sales of Macs and iPhones can push Apple stock higher. With about three and a half weeks left in the December quarter...

[MacDailyNews]

Wed, 07 Dec 2011 14:18:38 GMT

News: Morgan Stanley: Apple 2-3 Years Ahead of Competition with iPhone. Apple has a two to three year lead on the competition with its iPhone, which has seen the fastest growth in adoption rates in the history of consumer technology, according to a Morgan Stanley research team lead by AAPL analyst Katy Huberty. The firm published a 92-slide presentation called The Mobile Internet Report this week, a report dominated by Apple and its success with iPhone and iPod touch.

Tue, 29 Nov 2011 12:34:36 GMT

Andy Zaky: Apple is reaching a floor in this age of P/E compression, and is about to undergo one of the biggest rallies in [its] history.

Apple: The Most Undervalued Large-Cap Stock In America

In light of the recent sell-off in global equities, it is now an incontestable FACT that Apple is the most undervalued and underappreciated large-cap growth company in America. The stock trades at an extremely depressed valuation that Wall Street isn't taking seriously (8.25 Forward P/E Ratio), the company's growth continues to outpace every large cap company on the entire S&P 500, and the company's growth rate percentage - defying all laws of gravity - continues to accelerate without any sign of abating.

Every quarter that goes by Apple reports another multi-year record high growth rate that continues to be brushed aside and overlooked by investors. Apple's stock performance relative to its valuation and fundamentals, and relative to other companies with lower growth rates and more expensive valuations is completely abysmal.

In its recently reported fiscal Q3 2011, for example, Apple reported a 6-year record-high growth rate of 121.94%. Yet, one would never know this by listening to CNBC, Bloomberg or reading the average article from The Street.com or Business Insider. Instead, the only stories you will see are ones that don't really matter in the grand scheme of things.

For example, instead of pointing out how the company reported 122% earnings growth in fiscal Q3 or the fact that the company trades at a 13 P/E ratio, CNBC is quick to point out how iPod sales - an operating segment that makes up only 4% of Apple's total revenue - is slowing. Never mind the fact that iPhone sales grew over 140% - four times the smartphone market - from 8 million units to 20 million units in fiscal Q3 or the fact that Apple's revenue has almost tripled in 2-years.

Stop the presses because iPod sales, which produce less in revenue than iTunes, is now slowing. And it wouldn't be so bad if the press merely only reported these inconsequential facts. But it's not just that. It's the highly misleading and faulty conclusions drawn from these inconsequential facts that has been so damaging for the stock over the years. If it isn't the Zune iPod Killer (MSFT), or the Android iPhone Killer (GOOG), then it's the Amazon Kindle Fire iPad Killer (AMZN) which amounts to nothing less than the obvious end of Apple. Forget about reporting the actual facts or the news, everything is now editorialized.

No one cares to report that iPhone sales outpaced the market by 400% or how extraordinary it is for a company of Apple's size to see accelerated revenue growth of 66% leading to sales of $108 billion in 2011. Or that you would have to go back to 2004 when Apple was reporting less than $1.00 in EPS to find a year with a higher EPS growth than the 82.71% Apple recorded in 2011. True story. See below:

There seems to be an ever-present sentiment-war being waged against Apple as it is constantly hit from all sides in a very concerted way. And this is not something new. It's been going on for years with Apple. With the recent passing of Steve Jobs, it has only gotten much much worse. I'm here to try and balance the scales a little by reminding everyone about the simple truth concerning Apple. While the company's earnings have absolutely skyrocketed since 2008, to the dismay of investors and to the delight of Business Insider, the stock has gone nowhere.

In late 2007, Apple traded at $200 a share after reporting $3.93 in EPS on $24.5 billion in revenue. Turn the pages to 2011 and it's an entirely different company. In just four-years, Apple's earnings have grown 600% to $27.68, and its revenue skyrocketed 341% to $108.2 billion. That's the most explosive 4-year growth rate of any large-cap company on the entire S&P 500.

Yet, one wouldn't know this given the stock's very sluggish performance, extremely depressed valuation and the media's permanently negative sentiment on the stock over the past few years. The stock is now trading at an extremely low 13.1 trailing P/E ratio. We're talking about a valuation level that Apple hasn't seen in nearly a decade - this despite the fact that the company grew its earnings 82% this year which is the highest in over 7 years. We're talking about a valuation that is more than 10% lower than the lowest point during the financial crisis. See below:

And even though Apple has grown its earnings by 600% in four years, the stock has only risen 81%. And while 81% might seem like a lot, just remember that the company is essentially 7x larger than it was in 2007. Apple has also grown its balance sheet 5-fold since that time and its cash has also risen 5-fold. You would expect to see at least a 200-300% move in the stock, and if history repeats itself, you soon will.

The chart below should give you an idea of how poorly Apple has performed relative to its growth. On the first day of 2008, Apple traded at $200.50 a share. It had $3.93 of earnings under its belt at the time. Today, the company has $27.68 in earnings and only trades at $363.57 (as of Friday) which is merely 81.3% higher. This versus the 600% in earnings growth over the same period.

The company's earnings growth accelerated dramatically in 2011 as it reported an 82.7% earnings growth rate. Yet, apparently an 82.7% earnings growth rate isn't good enough to give Apple a valuation that is higher than Cisco's (CSCO) 15.11 P/E ratio (earnings contracted in 2011), Oracle's (ORCL) 16.35 P/E ratio (less than half of Apple's earnings growth) or Google's 19.19 P/E ratio (grew 15% this year).

Over the past year, Apple has been taken to the woodshed on every sell-off in the market. It also significantly underperformed the S&P 500 on the entire QE2 melt-up rally between October 2010 and June 2011. And before you think it's because Apple's earnings must be slowing, that's clearly not the case. Apple's earnings have actually accelerated in 2011. Not just grown, but accelerated. There's a key difference. The growth rate is higher in 2011 than in 2010, 2009, 2008, 2007, and 2006. Basically, Apple's earnings growth rate this year is higher than in any year since the advent of the iPhone. Talk about acceleration in earnings. And yet the stock has gone nowhere this year. See below:

Now if that doesn't shock you, then this will: In fiscal Q2 2011, Apple reported a 6-year record high growth rate of 92.19% in earnings and 83.22% in revenue. That shatters the previous record of 86.03% earnings growth in fiscal Q2 2010 and 74.39% revenue growth in fiscal Q4 2008. After this report, Apple collapsed 14% over the next 3-month period on concerns that (insert any B.S. reason here). So after reporting the highest revenue and earnings growth rate in 6-years, Wall Street sells the stock down by $50.00 on the quarter leading to further massive P/E contraction.

And if that isn't enough to convince you of how mistreated the stock is relative to its growth, in the very next quarter - fiscal Q3 2011 - the company absolutely shatters fiscal Q2 2011′s growth rate in every way. The company recorded 121.94% earnings growth which is the highest quarterly growth rate since 2004. You would have to go back almost 8-years when the iPod was just getting started to find a quarter with a higher quarterly growth rate on earnings.

Yet, despite this incredible year that Apple has reported, the stock is trading lower than it did 10-months ago and is now almost lower than it was a year ago. The company has accelerated and doubled its earnings, and is almost down on the year. It trades at under a .5 PEG ratio and less than 8x next year's earnings.

In spite of growing its TTM by 82.7% - which is higher than every single large-cap company in America - Apple now trades at decade-low P/E ratio of 13.13. At the beginning of the year, the company traded at $364.90, which is a little more than $1.00 above Friday's close. That means that even though the company grew its earnings by almost 100% on the year, the stock went nowhere. The chart below shows Apple's growth in its trailing 12-months of earnings over the past several years:

One would think that with such a nice consistent rise in Apple's trailing 12-months of earnings that the stock would enjoy a nice consistent rise as well. But instead, what we've seen is the stock undergo a very brutal 2-year period of massive P/E compression. In fact, Apple's P/E ratio has fallen just about 59.12% in just 8 quarters, which means that the company's earnings are discounted by about 60% more than they were valued at the start of 2010. See below:

Apple is now trading at the S&P 500 average valuation of 13x despite growing its earnings at a pace that is higher than the top 100 S&P 500 stocks and higher than 90% of the stock listed on the index. By pricing Apple at $363, the market is saying that Apple is worth no more than the average stock. 66% revenue growth and 82% earnings growth isn't valued at all. Neither is Apple's $100 billion cash (including fiscal Q1 2012) nor its entire balance sheet for that matter. In fact, Apple is now valued below the average stock trading on the NASDAQ-100 which suggests that the market believes that it is better to hold the NASDAQ-100 (QQQ) than it is to hold Apple from a valuation perspective.

Now even though Apple's growth has far and outpaced the growth of Oracle (16.35 P/E), Amazon (96.15 P/E), Google (19.19 P/E), Cisco (15.11), Qualcomm Inc. (QCOM) (20.62), Amgen, Inc, (AMGN) (13.53), Comcast (CMCSA) (15.11 P/E), IBM (IBM) (13.95 P/E), Chevron (CVX) (13.50), Johnson & Johnson (JNJ) (14.94 P/E), Procter & Gamble (PG) (15.49 P/E), and AT&T (T) (13.91 P/E), the stock trades at a far lower valuation relative to these top holdings on the NASDAQ-100 and S&P 500. Some of these companies have actually contracted in 2011. Yet, the market values the earnings out of these companies on the order of 4-5 times more in some cases than they value the earnings out of Apple.

Light at the End of the Tunnel

The whole point of this article is to establish one thing and one thing only. That Apple is extremely undervalued contrary to what you might hear in the financial press. By demonstrating that the company is this undervalued, we will then be able to make a very compelling case for why this cannot go on forever. Eventually, Apple will hit an inflection point where this 2-year phase of P/E compression comes to an abrupt end. Apple is already valued below the S&P 500. If the earnings continue to come in anywhere close to 50% which is far below the 70-82% we've seen in the past 3-years, then the stock will have to rise significantly in order to merely maintain its depressed valuation.

For example, in order for Apple to maintain its depressed 13.13 P/E ratio going into 2012 and 2013 - which is right at the average on the S&P 500 - the stock will have to rise to $577.72 next year. Most good analysts are expecting the company to report about $44.00 in earnings next year and about $55.00 in earnings in 2013. That would be 62% and 25% growth respectively. That's far below the growth Apple has posted over the past four-five years (see above). Remember, Apple's growth is currently accelerating and completely discounted. This outlook presupposes significant deceleration in the growth rate as the result of the law of large numbers. Yet, what you should take from this analysis is that Apple has nowhere to go but up.

Suppose the stock's valuation were to contract further to a 10 P/E ratio within the next two years. Even if we get that level of P/E contraction which would be at a level that is far below the average on the S&P 500, the stock would still trade at $550 a share 2-years from now on the assumption of 25% growth between 2012 to 2013. What happens if the growth stays in the 60-70% range? What happens if the growth continues to accelerate? Neither of those scenarios are anywhere even close to being priced in. In fact, Wall Street is currently modeling for massive contraction in the growth rate. That's an unwise decision given that Apple just guided fiscal Q1 2012 - this quarter - for 80% earnings growth. Notice, Wall Street is modeling for 25% growth while Apple has guided for 80% growth. Who do you believe?

In future articles, we will build a case for why Apple is reaching a floor in this age of P/E compression, and is about to undergo one of the biggest rallies in the company's history. As the valuation becomes more depressed, the case becomes even more compelling and the chances for a massive Apple upside correction increases dramatically. Stay tuned.

Disclosure: I am long AAPL. Andy Zaky is a fund manager at Bullish Cross Capital, which holds Apple as a major holding in its portfolio.

Mon, 28 Nov 2011 14:17:33 GMT

Money manager Bill Gunderson:

A cheap growth stock? Apple

The shares of Apple have pulled back, along with the overall market as of late. They hit a high of $422 per share five weeks ago, and they were recently trading at $363.57. That is a pullback of 13.8%. During that same period, the S & P 500 is down just 5.4%.

A lot has happened at Apple's address of 1 Infinite Loop, in Cupertino during the third quarter of 2011. Its founder and chief visionary Steve Jobs passed away, the leadership baton was handed off to Tim Cook, the company reported earnings that for a change, did not live up to analyst's expectations, and many of Apple's competitors have entered into the tablet wars. If that is not enough, the company also released its latest version of the smart phone, iPhone 4s.

With all that has happened at the company, no wonder investors have paused to re-evaluate the stock. With the shares now almost 14% cheaper than they were just five weeks ago, it is a good time to step back and look at where the stock is at now from a performance and valuation point-of-view.

Over the last 10 years, the shares of Apple have delivered an average annual return of 43.5% per year. This puts Apple at number 17 among the 2,700 stocks that I follow.

Over the last five years, the shares of Apple have delivered an average total return of 32.0% per year. This performance places Apple in the top 25 of all the stocks I cover.

The stock has also quite handily beaten the S&P 500 over the last 3 years and 12 months. In fact when I tally up the long-term, intermediate term, and short-term performance of Apple and compare it with 2,700 other stocks, the stock achieves an overall performance grade of "A."

With the recent pullback in the stock, Apple's shares only earn a current momentum grade of D+, however.

It should also be noted that during the market stress of 2008, Apple was down a whopping 56.9%, while the S& P 500 was down 38.5%. Apple is not exactly a defensive stock that holds up well during times of market duress.

It is pretty hard to argue with the performance of the shares of Apple. Apple has been one of the great stocks of the decade, yet the recent pullback in the shares is cause for concern. This is where we have to turn to the current valuation of the shares:

Apple currently has a PE ratio of 13 and a forward PE ratio of just 9.51. Apple's earnings have grown at an astonishing rate of 60% per year over the last five years, and according to the army of analysts that follow the stock are expected to average 19% growth over the next five years.

Over the last four quarters, Apple's earnings have grown by 75%, 92%, 122%, and 52% respectively , I don't think that 19% growth going forward is out of line. With a forward PE ratio of 9.51, and an expected growth rate of 19%, Apple's PEG ratio is 0.50. It is not easy to find cheap PEG ratios like this, especially among great growth stocks like Apple.

Apple earned less than $0.10 per share ten years ago, just over $9.00 per share five years ago, over $15.00 per share three years ago, and the company is expected to make $38.59 per share next year. Again, we have quite remarkable evidence of the astonishing growth at Apple that has made it one of the great growth stocks of all time.

If the guidance that the company has given to the analysts is even close to being correct, the company will be earning $77.94 per share, five years from now. I know that sounds like a big number, but consider that the earnings have gone from less than $0.10 per share ten years ago, to a current expectation of $38.59 per share next year.

As a professional money manager, I am asked the following question all of the time: "Don't companies mislead analysts in order to pump up their stock price?" Having been an analyst for a number of years, the answer is an emphatic no! In this litigious environment, the vast majority of companies, if anything try to talk down expectations.

Stocks trade on expectations, until those numbers change. The current expectations are for just under $78 per share in earnings for Apple, five years from now. Now, what kind of multiple will those earnings deserve if indeed they are achieved?

The stocks currently has an earnings multiple (PE) of 13. Over the last four quarters, the PE ratio has ranged between 12 and 18. Over the last five years, the average PE of Apple has been 13.6.

I am using a multiple of 10.5 to calculate a five year target price of just over $818 per share. I am a bit different in that I like to look at five-year target prices instead of shorter term, 6-12 month target prices.

When we learned to drive, we were most likely told to keep our eyes further on down the road instead of the end of our hood. If we did that, it would be easier for us to steer a straighter course.

I have owned the shares of Apple for a long time. The shares have been very good to me. Along the way, I have to ride through countless pullbacks like the one that the stock is going through now.

The bottom line is this however, there is currently not a cheaper quality growth stock in the entire market. Take your eyes of the end of the year, and look out further down the road!

Thu, 24 Nov 2011 12:24:04 GMT

Reasons Why Apple Shares Are Poised To Reach $800

Apple shares have been weak along with the markets in recent days. I view dips in Apple stock to be a buying opportunity and I believe that the stock is not dropping for any significant company specific reason but rather because Apple shares are a source of funds and liquidity (almost like cash). Just as some hedge funds and investors sell gold to raise cash, many are doing the same with Apple. It's smart to use these cash raising dips as a buying opportunity, because the long-term trend for Apple is up, and the stock remains very undervalued.

Serious value is left in the stock which I believe will be unlocked over the next year or two. The company has many billions in cash which appear to be very excessive for any corporate needs. This cash could be used to pay a special dividend to shareholders. A large cash dividend would make the stock less expensive to buy after the payout.

Another catalyst for a higher stock price would be a stock split. The stock is out of reach for smaller investors and options traders. Apple could enact a stock split and that would likely increase investor interest and the price to earnings ratio. Expansion of the PE ratio is a major catalyst for this stock because the stock only trades for about 10 times earnings. With a growth rate near 20% for the next few years, the PE ratio should be about 20 times earnings, which implies a stock price of $800.

Asia and China growth is not priced into the stock. There are only four Apple stores in mainland China and one store in Hong Kong. The expansion potential in China is absolutely enormous, especially when you consider the extremely small footprint Apple has now. See the stores here.

The demand for Apple products is tremendous and when the Apple iPhone 4s was first released in Hong Kong on November 11, the inventory was sold out within three hours that same morning. Some customers waited in line for more than 24 hours to buy the iPhone. I don't know of any other company that can get people lining up to buy products at full price. Read about that here. This proves the potential is enormous and the five stores in China are just the tip of the iceberg in terms of long term potential.

Apple is a leading maker of computers and mobile devices. The 50-day moving average is $395.16 and the 200-day moving average is $363.81. Earnings estimates for AAPL are about $34.52 per share in 2011 and $38.59 for 2012. However, these estimates appear to be too low. The 52-week range is $305.87 to $426.70.

Apple is a great company and will probably continue to be a solid investment for the foreseeable future. I believe Steve Jobs has built unstoppable momentum and put this company on the right track for the foreseeable future. Dips to about $365 look like particularly good buying opportunities since this is right around a key support level (the 200-day moving average).

Fri, 11 Nov 2011 13:15:00 GMT

Morgan Stanley: Apple's share of world's largest PC market -- China -- set to grow from 5% to 21%

Chinese consumers rate Macs as most desirable, although only 7% can afford one

Click to enlarge.

In August, according to IDC, China overtook the U.S. as the world's largest consumer of personal computers.

On Wednesday, Morgan Stanley issued the results of a survey suggesting that Apple (AAPL) is the best positioned of all PC manufacturers to capitalize on the boom.

Summarizing the results of a proprietary Alphawise survey of 1,553 consumers in 16 Chinese cities, Morgan Stanley's Katy Huberty reports:

Chinese consumers currently spend an average of $600 for their computers (same as Americans)
Half plan to buy a new computer within the next two years, and they expect to spend 6% more for it
They rate Apple as the most desirable PC brand, well ahead of other international and domestic PC makers -- including Beijing-based Lenovo
Asked which brand of computer their next PC would be, 21% of Chinese consumer chose Apple
Only 7% say they are willing to spend more than $1,000 for a computer, but as the Chinese consumers grow more affluent, writes Huberty, that should change

Based on the survey results, the biggest winners and losers in the Chinese consumer market are:

Loser: Lenovo. 31% own a Lenovo PC, but only 23% plan to buy another.
Winner: Apple. 5% currently own, 21% hope to buy one
Winner: Hewlett-Packard (HPQ). 11% own, 13% hope to buy
Neutral: Dell (DELL). Holding steady at 6%

The enterprise market in China is a different story. There the survey results favor Dell and Apple, while indicating trouble ahead for HP. See the chart below.

Fri, 04 Nov 2011 16:53:02 GMT

With 4% market share, Apple's iPhone rakes in 52% of mobile profits

Apple is estimated to have taken in 52 percent of the handset industry's operating profits last quarter, despite only having a 4.2 percent global handset market share.

Analyst T. Michael Walkley with Canaccord Genuity issued a note to investors on Friday in which he estimated Apple took more than half of the industry's operating profits in the third quarter of calendar 2011. That's a 5 percent increase from the third quarter of 2010, when Apple's share of industry operating profits was 47 percent.

In fact, Apple's growth in profit share came even as Apple lost market share. The iPhone dipped from a 5.4 percent market share to its current 4.2 percent as Samsung is estimated to have led the industry in smartphone shipments for the quarter, though its profits shrank.

Calling it an "epic reversal of fortunes," Canaccord noted that in 2007, Nokia had 67 percent of operating profits in the industry, while Apple and its iPhone represented just 4 percent. Now, with more than half of the industry's profits, Apple has switched places with Nokia, which accounts for just 4 percent of operating profits.

Apple's chief rival in the mobile industry is Samsung, which Walkley said has scale advantages and the leading share of Android devices. Together, Apple and Samsung are said to have represented 81 percent of the handset industry's operating profits last quarter.

Walkley said he has conducted "channel checks" that show strong demand not only for Apple's new iPhone 4S, but also for the lower-priced iPhone 4 and iPhone 3GS models. Accordingly, he has increased his projected iPhone sales for the December quarter to 29 million, up from 27 million.

The analyst previously reported in July that Apple had captured 50 percent of the handset industry's profits during the first quarter of 2011. Walkley has also repeatedly revealed that Apple's previous-generation products, like the iPhone 3GS, are strong sellers that often outperform newer Android handset models.

On the strength of the iPhone and Apple's industry leading profits, Canaccord Genuity has maintained its buy rating for AAPL stock and increased its price target to $560.

Wed, 26 Oct 2011 11:55:58 GMT

AppleInsider:

Combined Mac and iOS shipments make Apple world's second largest PC maker

iPad and Mac shipments both outgrew the Windows PC market in CYQ3 2011, and if combined would boast a 99% growth rate and make Apple the second largest PC maker in the world.

In a report released on Tuesday, analyst Horace Dediu of asymco contrasts Apple's Mac OSX's 27.7% growth rate with Windows-based systems' 2.5% for the third quarter of 2011. He added that if iPads were included with Mac OS X, Apple's "computer" shipment growth rate would be 99%, making it the world's number two PC maker with 15% market share, falling just short of HP's 15.7%.

Apple sold a record 11.2 million iPad units in the quarter ending in September seeing a 166% unit growth, doubling the company's PC shipment growth despite a record-breaking 4.89 million Macs shipped.

During Apple's Oct. 18 quarterly earnings conference call, Chief Executive Officer Tim Cook admitted that iPad sales cannibalized Mac sales but that iPad growth is coming primarily at the expense of Windows PCs.

"With cannibalization like this, I hope it continues," Cook said.

By comparison, Windows PC makers are seeing "low-end disruption," or losses in market share over the last three years, with the most affected companies being smaller OEMs, which decreased 10.5% to around 30% share. Larger manufacturers like HP, Acer and Dell lost 2.6%, 3.9% and 3.4% share respectively, while Lenovo saw a 4.48% growth over the same period.

While small "other" OEMs have seen a decrease in share in the low-end PC industry, similar small companies are growing in the mobile phone sector as communication moves up market, which he calls "new market disruption." The "other" phone OEMs grew from 15% to 24% in the same quarter.

The analyst sees Apple taking advantage of the "low-end disruption" in the PC sector with the iPad, and "new market disruption" in the mobile phone market with its iPhone line.

Dediu suggested that the company's Mac business continues to grow alongside iOS devices is because its PC line "consists of 74% portables," with products like the MacBook Pro and Air being "largely unmatched" and having "a near monopoly in their target price."

Although Apple's Mac line has continued to see a higher growth rate than PCs for more than 20 quarters, Windows still holds the 82% of the market, followed by iOS with 10.5%, OS X with 4.7% and Android with around 3%.

Mon, 24 Oct 2011 14:29:45 GMT

Piper Jaffray: Apple is already building prototype TV sets.

One more thing...?

The solution Steve Jobs said he "finally cracked" could be a $6 billion business by 2014

Click to enlarge. Source: www.patentlyapple.com

In a note to clients released Monday, Piper Jaffray's Gene Munster seizes on remarks attributed to Steve Jobs in the biography published overnight as "another data point" to support a thesis he's been championing since 2009.

"I'd like to create an integrated television set," Jobs told Walter Isaacson, his authorized biographer. "It would be seamlessly synced with all of your devices and with iCloud... It will have the simplest user interface you could imagine. I finally cracked it."

A significant hurdle to a full-fledged Apple (AAPL) television set (as opposed to the Apple TV set-top box), Munster writes, is combining live television with shows previously captured on iCloud. "Perhaps this code is precisely what¬[sgl dagger] Jobs believed he has 'cracked,'" Munter suggests, adding that Apple could use the new Siri voice activated system "to bolster its TV offering and simplify the chore of inputting information like show titles, or actor names, into a TV."

Munster's other TV-related data points (I quote):

Based on Jan-11 meetings in Asia (not with component suppliers), we believe Apple is investing in manufacturing facilities and securing supply for LCD displays. These displays could range from 3.5" mobile displays to 50" television displays.
More recently, in Sept-11 we met with a contact close to an Asian component supplier who indicated that prototypes of an Apple television are in the works.
As recently as May-11 the US Patent & Trademark Office has published Apple patents relating to television-specific technology. In an Oct-06 patent application Apple filed for patents related to software for browsing and recording live television, features most closely related to, but not currently available in, the Apple TV.
More recently, in US patent 7,865,927 published in Jan-11, Apple explores advanced TV broadcast menus (see image). In these patents, Apple refers to a system that could "include a set-top box with or without a digital video recorder (DVR) (or, personal video recorder (PVR). In other example implementations, a display with built-in functionality (e.g, a television)."

Bottom line, according to Munster: "We believe that of the estimated 220m flat panel TVs sold in 2012, 48% or 106m units will be internet-connected, of which Apple could sell 1.4m units. We believe an Apple Television could add $2.5b or 2% to revenue in CY12, $4.0b or 3% in CY13 and $6.0b in CY14."

Below the fold: Munster's TV spreadsheet (units and revenue in millions).

Wed, 19 Oct 2011 12:05:51 GMT

JP Morgan and Bernstein on Q4 results that missed expectations:

Just a blip...

Apple Inc stunned Wall Street by reporting fourth-quarter results that missed -analyst- expectations for the first time in years, but at least two brokerages downplayed the results. Sanford C. Bernstein viewed the results as a "blip", adding that Apple was well positioned to win in the emerging smartphone and tablet marketplaces and that its franchise has strong momentum which may be difficult to displace. "We expect Apple to continue outperforming on both top and bottom-line growth metrics relative to the peers as the rapid growth phenomena of the iPhone and iPad intensify," JP Morgan Securities said in a note to clients. On Tuesday, Apple, the world's largest technology company, reported quarterly iPhones sales short of analysts' forecast. The iPhone, Apple's flagship product, yields about 40 percent of annual sales. "The principal shortfall was in iPhones, which experienced a meaningful deceleration over the course of the quarter, as consumers increasingly delayed purchases in advance of the new iPhone 4S," Bernstein said in a note to clients. However, over 4 million customers purchased the new iPhone 4S in the first 3 days after its release, compared to 1.7 million in the first 3 days when the former model was released one year ago. JP Morgan believes the "rare miss" is explainable and provides an entry point for opportunistic investors. "Apple's ongoing penetration of China and other emerging markets likely can be measured in years and stands to have a significant, positive impact on the growth profile", JP Morgan said in a note to clients. "What is interesting is the guidance is less conservative than usual for their next quarter. It's a timing issue, where it looks like the business that people thought would be in the September quarter is occurring in the December quarter," said Sterne Agee analyst Shaw Wu.

Wed, 19 Oct 2011 11:27:39 GMT

Don't Be Distracted By Q4 Earnings, Apple Is Setting Itself Up For An Incredible 2012.

By Adam Muller:

On October 18 after the market closes when Apple (AAPL) reports earnings for its fiscal fourth quarter ended September 30, 2011, pay close attention to anything they reveal about the first quarter of fiscal 2012. While Q4 matters, only short-sighted investors will make investment decisions based on whether they beat or miss consensus, and if so

Complete Story » By Adam Muller.

Wed, 19 Oct 2011 11:04:51 GMT

Apple projects all-time high $37 billion holiday quarter

Apple on Tuesday said it looks to hit $37 billion in revenue for the upcoming holiday quarter, a stunning $10 billion increase year over year, as expecting to set an all-time high with sales of the iPhone 4S.

During a conference call on Tuesday, Apple's Chief Financial officer Peter Oppenheimer, said that he expects the company to earn around $37 billion in the holiday quarter, with diluted earnings per share of about $9.30. The projection is $8 billion more than Q3 2011, the company's previous best quarter ever, and an over $10 billion gain year-to-year.

December is part of the first fiscal quarter of 2012, which will span 14 weeks rather than the usual 13. This is done every six or seven years to align the 52-week, 364-day fiscal year with the 365-day calendar year. Oppenheimer notes that the extra week will have little effect on earnings.

Apple Chief Executive Officer Tim Cook, said that he was thrilled with the strong finish to the 2011 fiscal year, and expects another strong performance in the upcoming quarter. Much of the CEO's optimism is based on the record-breaking sales and high demand for the company's new iPhone 4S handset.

"Customer response to iPhone 4S has been fantastic," Cook said. "We have strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline."

Apple sold over 4 million units of the new iPhone model during its opening weekend, a record for initial iPhone sales.

The demand for the 4S has been so high that Apple modified its purchase policy by enacting an online reservation option. Cook, however, reassured during the conference call that there would be a "large supply" of the device available in time for the holidays.