“Shares of a handful of large tech companies including Apple Inc, Oracle Corp and eBay Inc are likely to increase by more than 20 percent over the next year, according to Barron’s,” Lauren Tara LaCapra reports for Reuters. “The financial publication listed 10 tech stocks as its top picks in its weekly edition on Sunday.”
“The No. 1 pick for 2012 is data-storage company Fusion-io Inc, which Barron’s highlighted as a possible takeover target,” LaCapra reports. “The paper placed a $52 price target on Fusion-io over the next year, indicating the stock will more than double.”
“Although Apple’s earnings disappointed investors last week, Barron’s said the stock could rise 25 percent over the next year,” LaCapra reports. “Barron’s cited a likelihood for market-share gains and increased sales of Apple’s latest iPhone model, as well as the potential for share buybacks or a dividend under new Chief Executive Tim Cook.”
Read more in the full article here.
MacDailyNews Take: Don’t hold your breath for Apple to announce share buybacks or a dividend.
Related articles:
Fusion-io teams with NVIDIA, Tweak Software and Thinkbox Software to accelerate entertainment production – August 8, 2011
Woz: Tech sector is on the verge of a revolution in computer storage architecture – December 9, 2009
Apple co-founder Woz joins Fusion-io as Chief Scientist – February 6, 2009
That’s a brave prediction. Wouldn’t surprise me if it made that kind of jump, but with the passing of Mr. Jobs I’d think Wall Street would be nervous about Apple.
Not that they should be.
Actually, not so brave at all. Right now, Apple’s PE is already a ridiculously low 11. Wall St was nervous when Steve was ill, if anything, Steve’s untimely passing, means that the uncertainty should be gone and Wall St should be less nervous.
Let’s look at the numbers. If Apple goes up 25%, that would put the price around $500. Can earnings support that? Well, based upon Oppenheimer’s guidance for Xmas, then Apple is very likely to grow earnings around 50% in FY2012, so yeah, a 25% increase in Apple’s share price would in fact mean more PE compression.
Here are some numbers: Oppenheimer guided to $37B and $9.30 eps for Xmas. Apple typically guides 12 to 20% lower than actual. Let’s round that $9.30 to $10, which is only 7.5% higher. Apple is likely to beat that handily. If you look at Apple’s earnings you know that Xmas is the best quarter in the year. However, Apple’s Xmas quarter is the first quarter of its fiscal year, meaning that Xmas is not the best quarter in its Fiscal Year, as the following June and September quarters are now usually as good if not better. In other words, you can estimate the Fiscal Year’s numbers by multiplying the Xmas quarter by 4. It’s a rough approximation. You multiply Xmas’ $10 eps by 4 and you get $40 eps for FY2012. That’s a little under a 50% improvement from FY2011.
Also by then, Apple could have about $120B in cash and equivalents. Using that, a $500 share price and a $40 eps, would give Apple a PE of about 8.6. That’s like a utility for a company growing like a rocket. Apple should easily hit $500 next year, barring any catastrophic macro effects.
If apple doesn’t go up about 50% in a year, then its PE ratio will have gotten compressed even more from its ridiculously low 11, net of cash.
No way is Apple share price going up 50% within the next year. Wall Street can’t possibly allow the stock to rise that much. Better be satisfied with 25% or somewhere close to $500 a share. There’s no reason that hedge fund and institutional holders would drive up the price 50% when they can simply churn the stock to make money. Apple is a completely controlled stock by those funds, so the P/E will continue to compress. The more revenue Apple makes, hedge funds will slow down share price gains accordingly.
http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=aapl
Compare to Amazon going in the opposite direction:
http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=AMZN
It’s a no-win situation for Apple shareholders hoping for higher share prices. Apple will never return to historic P/Es. Wall Street has pegged Apple as a clunker.
Don’t flush the cash out as dividends or buy-backs. As the pile has grown, the potential to use it for a quantum leap have grown also. Thought-controlled iDevices? Fusion-powered Macs? Warp drive?
How about a phone network that doesn’t make its customers curse their name on a weekly basis?
Patience, grasshopper. Patience.
LTE-Advanced is the technology solution. Apple has the cash on hand to dominate its rollout. LTE-Advanced is IP based, hence clearly a data/computer network with voice as a riding service. The incumbents business model will have the bottom drop out of it.
“Lauren Tara LaCapra” i like the name