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Apple’s stock still has bite

Apple’s stock still has bite

Shares of Apple, the maker of the iPhone, iPad, iPod and Macintosh computer, have relentlessly marched higher since March 6, 2009, when they traded at a low of US$82.33.

Just slightly over three years later the share price has moved past $637, a 670 per cent rise, and Apple is the market story of the year, making history and breaking records held by the elite of the corporate world.

Apple’s market capitalisation, the total market value of all outstanding shares, surpassed that of century-old oil giant Exxon Mobil on August 11, 2011, earning it the title of the world’s most valuable company.

Apple’s market cap is approximately $590 billion, compared to second place Exxon Mobil at $405 billion. Now the company is poised to become the first-ever firm to reach a market cap of $600 billion.

At present levels, Apple is more valuable than the annual gross domestic product of Switzerland, which ranked 19th in the world in 2010.

Analysts are constantly elevating their price targets as the stock rockets to new heights.

Topeka Capital Research recently raised its target price to $1,000 a share.

If Apple is able to exceed $960 a share, it would reach a market cap of $1 trillion. The market talk is not a matter of if but when. Unlike Goldman Sach’s bold prophecy in May 2008 that oil could soar to $200 per barrel, the daring prognosis for Apple shares has substance.

Apple is comfortably sitting on $100 billion in cash, which it will partially use to commence paying its shareholders a quarterly dividend of $2.65 per share.

Mutual funds and exchange-traded funds, whose mandates were limited to income-generating stocks, can now purchase Apple as a result.

Also, Apple intends to buy back $10 billion worth of its shares over the next three years, putting the buyback alone in the range of the market caps like those of Hershey Company and Campbell Soup Company.

Despite the soaring share price, the price-to-earnings ratio is only 17 because earnings are also climbing at a comparably frantic pace.

In the last quarter, Apple posted revenue of $46 billion, a net profit of $13 billion, and earnings per share of $13.87.

This compares with an EPS of 7.06 in the previous quarter, and an EPS of 6.43 in the same quarter last year.

Apple sold a record-setting 73 million devices, led by the iPhone with 37 million. The iPod and iPad each had sales of 15.4 million, and 5.2 million Macs were sold.

iPad is the fastest-selling product in Apple’s history, exceeding 55 million units in only two years. It took the iPhone three years to reach this mark, and the iPod five years. Predictions are that the tablet PC will unseat the desktop and laptop, and Apple right now is the undisputed tablet leader.

The company sold more than 90 million iPhones in 2011, more than doubling 2010 sales. Apple’s smartphone market share is only 9 per cent, with 75 per cent of profits sourced from these handsets.

The smartphone market is set to greatly expand as they account for only three out of 10 phones sold today.

Despite cheaper alternatives, Apple’s unit sales will grow with the increased shift from dumb phones to more advanced devices.

The story of the most beloved stock in the market is far from over, with many more milestones to reach.

The next accolade is likely to be the most profitable company in the world.

Anthony Galliano is the chief executive of Cambodian Investment Management.  
[email protected]


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