April 4, 2012
Apple’s Hot Stock Keeps Getting Hotter
Michael Harper for RedOrbit.com
If you're an Apple fan, you've got a big year ahead of you. The new iPad has already been released to great fanfare and opening day sales and rumored product launches already have the rest of 2012 filled. If you're an Apple stockholder, then you may soon have reason to celebrate.
Global demand for the iPhone and iPad are at a screaming high. Their competition has yet been able to produce a tablet decent enough to threaten their market dominance. Adding to the Apple frenzy is the persistent rumor of an Apple TV which some analysts and pundits say will revolutionize the cable and television industry in much the same way the iPod forever changed the way we buy and listen to music. This sort of introduction into a new market could not only disrupt the current television industry, but it could also provide several more years of impressive numbers.
These numbers, by the way, have placed Apple at the top of the heap and have earned them the title of "Most Valuable Company in the World," dethroning big oil companies.
All of these reasons - the hype, the product rumors, and Apple's market share - have got analysts and Apple watchers shooting for the stars as they set their target prices sky high.
Brian White of Topeka Capital Markets announced his prediction this week: Apple will reach $1,001 in 12 months.
Gene Munster of Piper Jaffray doesn't think he's far off, but has set his sights a little farther down the road. As he concluded the latest iPad keynote event, Tim Cook made this pronouncement: "“¦across the year, you're gonna see a lot more of this kind of innovation. We are just getting started."
This sort of excitement about new products is part of the reason analysts are so bullish on Apple.
But will Apple continue to impress us in the same way they have for more than ten years? Some analysts worry making such lofty predictions will bring the stock falling down hard. While others wait, some even anxiously so, for Apple to make a great misstep, Apple continues a long upward climb, possibly beyond the $1,000 mark.
Aiming for the cheap seats
Analysts' projections for Apple's stock price have caused some generous, if not wacky targets. Brian White once covered Apple for Ticonderoga, a now defunct brokerage firm. Before leaving, White put a gimmicky price target on Apple of $666. While shocking, this estimate wasn't quite the attention grabber White wanted. Now working for Topeka Capital Markets, White has set the bar even higher, projecting shares of Apple to reach $1,001 in 12 months. In a report, White has been quoted as saying, "'Apple' fever is spreading like a wildfire around the world," a quote that, along with his projections, have been getting the kind of coverage Topeka Capital Markets has been looking for.
Enter well known (and well respected) analyst for Piper Jaffray Gene Munster.
Making the pot just a little sweeter, Munster agreed with White's numbers, but not his timing, predicting Apple would reach the $1,000 mark in 2014. As the stock hits this mark, market cap will eventually top $1 Trillion, according to Munster. This would be a first for any company. In a note distributed by Notable Calls on Tuesday, Munster said, "Shares can reach $1,000 based on our belief that Apple will continue to win in global mobile devices."
Should he be correct about Apple's dominance in mobile, Munster predicts a stock surge to occur once Apple releases their new iPhone.
For whatever reason, be it prudence or immunity to "Apple Fever," Munster has set his 12-month target price to $910.
White and Munster aren't the only ones amping up their predictions: According to Bloomberg reports, JPMorgan Chase & Co. have also increased their 12-month target price from $625 a share to $715. Only four months deep, Apple has already had a stellar year. Thanks to steady-rising iPhone revenue and the instant success of the new iPad, Apple's stock has risen by 55% this year. They've even grown past Exxon Mobil Corp in terms of market value, trumping their $404.5 billion with their $586.8 billion.
From young to old and all over the world
As Apple dominates the mobile market, analysts continue to set the bar high for their stock. The iPhone, since being released in 2007, has been widely popular in the States. Globally, however, the iPhone is only getting started. In China the iPhone arrived in 2009, 2 years after it landed in America. Since then, the iPhone has exploded, quickly becoming the phone to have. Chinese users are even buying the iPhone regardless of if they are subscribed to an iPhone friendly carrier. China Mobile, the nation's largest carrier, has reported over 15 million iPhone users on their network, and they don't yet support the smartphone.
The global demand for the iPhone may be escalating at a sky-piercing rate, but this doesn't mean America's love affair with the smartphone has cooled. Along with announcing his new targets, Gene Munster of Piper Jaffray also issued a report Tuesday on his firm's semiannual survey of US teens. After surveying more than 5,000 American high school students, Munster's company found 34% currently use an iPhone. This number is not only an all-time high for the Cupertino company, it's doubled the results from last year. In addition, 40% of those students surveyed who don't have an iPhone plan to get one within the next six months. Piper Jaffray attributes this increase to the newer, low-cost options from Apple. As Apple released the iPhone 4 in 2010 and the iPhone 4S in 2011, they have kept the iPhone 3GS in their stable, offering it most recently for free on contract.
Some of these students, however, as well as millions others, may be saving their cash for the next version of the smartphone, which, depending on the rumor site you follow, will be announced in June or October. Analysts say rumors of the iPhone are already causing Apple's stock price to steadily climb. What features will the new iPhone have to cause such excitement among fans and analysts alike?
The next iPhone
When the new iPad was launched 3 weeks ago, Apple implemented a long-awaited feature: 4G LTE connectivity. Mobile devices imbued with the next-generation technology on a 4G enabled network can see speeds up to 5 times faster than 3G, the network the iPhone currently works on. If history is any indicator, where the iPad goes, so too will the iPhone. For example, as new processing chips are released with the iPad in March (beginning in 2010 and up to 2012), the new iPhone usually receives the same processing upgrade later in the year. Therefore, it is not entirely out of the question to expect the new iPhone to ship with this new, ultra fast telecommunications technology.
Pent up demand and expectations may also be stirring customers into a frothed frenzy. As the iPhone 4S was announced and released last October, many analysts and tech pundits alike had high hopes for a revolutionary iPhone. Rumors had been swirling for months about a different form factor, a larger screen, 4G LTE capabilities, and even Near Field Communications (NFC), enabling the use of mobile payments through the iPhone. Instead, Apple released a version of the iPhone physically identical to its predecessor. These hopes haven't died, though, as many of the same analysts and pundits are placing their hopes in the yet-to-be-released new iPhone. Revisions of the existing rumors include talk of a larger screen (4.6 inches, to be exact), previously mentioned LTE capabilities, a larger battery (to power the hungry LTE radios) and a decrease in thickness and weight. Some are even speculating the new iPhone will be made entirely of glass, though this doesn't seem at all likely.
A TV under trees this year?
Analysts are also looking to an as-yet-to-be-named product to be released this holiday season to drive stock prices through the roof. In Walter Issacson's book "Steve Jobs," he quotes the late CEO as saying, "I finally cracked it“¦" concerning a new TV.
This quote only added fuel to a raging fire of suspicion that Apple would enter the television and entertainment markets, revolutionizing both. Analysts are now quite sure an Apple-branded television (be it an entire television or an upgrade to their current little black box) will be announced and shipped this year.
According to a sundry of analysts, Apple has been in negotiations with various networks and cable companies to get the rights to distribute their content through the Apple-branded set.
Just as they did with the music industry through iTunes and the iPod and the publishing industry through the iBookstore and the iPad, Apple is expected to ask television companies to broadcast their content to the Apple TV for a percentage of what Apple makes in the sale. Though this move is widely accepted, only rumors have surfaced as of yet. Some of these rumors, however, include channels as apps, delivering network content through individual network apps, an actual Apple-branded television set or a simple box meant to attach to an existing television, and Siri-like voice control of the device.
Apple has already released 3 versions of a product called "Apple TV," but so far have been quick to refer to it as "a hobby." The most current iteration of the Apple TV resembles a square, black hockey puck capable of streaming 1080p video from the iTunes store as well as streaming audio, video, and screen sharing from iPad and iPhone devices.
If all this news about Apple's growth and soaring stock prices seem too good to be true, it just might be. Some analysts are concerned with Apple's growth, saying it's happening too fast and too broadly to be sustainable. After all, while everything seems bright and rosy for the Cupertino company, there are some sore spots bothering analysts. One of these issues is the death of Apple founder and longtime CEO, Steve Jobs.
An infamous tyrant when it came to details and with a remarkable intuition for innovation and design, Jobs built the computer company from garage to Most Valued Company. If he hadn't made his storied return in the 90s, the company would have died before the birth of any iDevice. While he spent his later years building the company to live on without him, some analysts and speculators worry the vision and direction may have left with Jobs. On the other hand, Piper Jaffray's Munster attributes some of the recent growth of Apple to the seamless transfer of leadership from Jobs to Cook.
Some analysts are also concerned the level of design quality and innovation may begin to decrease without Jobs at the reigns. If Apple makes one wrong step or releases a product less than revolutionary, their stock may not reach the high points predicted, according to the cautious crowd.
Finally, while the iPhone is in such demand all over the world, a new survey reveals it sits fifth in sales in China, behind Samsung and Nokia. If Apple cannot come to terms with China Mobile and bring their popular iPhone to China's largest network, they will miss an opportunity to sell more than 15 million phones in China alone.
As they sit high on the success of their mobile devices, Apple looks able to dominate markets in the future. This isn't including Apple's other sources of income, of course. Apple hopes their iPad and iPhone will act as "halo devices," bringing customers from other computing platforms to the Macintosh. Furthermore, iTunes and the App Store are also profitable businesses for Apple, as every iDevice sold depends on these marketplaces for apps, music, movies, books and more. It is possible and perhaps even likely Apple could make a horrible misstep and descend into a painful and spectacular fall from grace. However, if the analysts have anything to say about it, Apple will be a top-earning company for years to come, and a computing force not only to be reckoned with, but to be aligned with.