Sweet 16

Stock (Symbol) Stock Price

Apple (AAPL)


Data is as of Expected to Report Sector

February 11, 2011

Apr 21


Sharek’s Take
David SharekApple’s a Rock Star. Each quarter I’m amazed at how well the company is doing — and this quarter is the best I can remember. This stock looks so good I don’t even have to mention the iPad and iPhone figures. Here’s a few key facts:

  • Apple’s P/E is a sweet 16. Sixteen? Are you kidding me? In the fourth quarter of 2008 the P/E was 20 after AAPL got smacked down from $200 to $100.
  • Earning estimates popped higher — much higher than previous quarters. Analysts couldn’t raise figures fast enough or high enough.
  • Fair Value on this stock is double what its selling for today.

Another catalyst is coming as Steve Jobs says iPads will take half the mobile-ad spending in the second half of 2010. So Apple is not only Apple but also a Google mini-me.

One-Year Chart

AAPL’s P/E was sweet 16 last quarter. It’s still 16. The stock’s gone from $304 to $357 (+17%) and still the P/E hasn’t had time to expand. A year ago, when the stock was $200, the P/E was 18. Annual estimates were $11.34 — half what this year’s estimates are.

One negative is triple-digit profit growth is gone. Now we have only 75% growth. Historically, top stocks tend to decline when growth falls from the say 50% range to the 20% range, so this stock is still red hot.

Earnings Table
Apple’s revenue growth in the last five quarters is: 32%, 49%, 61%, 67% and now 71%. Business is accelerating — unheard of for such a large corporation. Profits grew 75% last quarter.
Boom! AAPL crushed estimates. Last quarter AAPL beat by $1.56 — a dollar fifty-six! A year ago the estimate for last quarter was $3.56.  Three months ago the company was supposed to make $4.87 — analysts upped this during the quarter to $5.39 — and the company came through with $6.43. That’s almost double earlier estimates.
Annual Estimates continue to increase. Now we’re looking at almost $23 for the year. The stock is selling for around $350 and the company is expected to make $147 within five years. 2014’s estimate is $30.87, 2015’s is $37.30.
Quarterly estimates flew higher. NxtQtrEst increased by more than a dollar. With the trend in increases AAPL should be growing at 75% through the fall. The 4QtrsOutEst needs time to grow. 

Fair Value
Apple is selling for 16 times earnings and is worth 35 times earnings. This stock is worth $800 now and is selling for around $3.50. There’s not even a whole lot of risk because the P/E is so low. Obviously the company sells iPads and iPads and songs every day, so its not like revenue can dive.
Ten-Year Chart
Apple’s ten-year chart is amazing.The stock is extended right now but profits are expected to climb 51% this year so I don’t see a decline on the horizon. In fact, this could lead to a spike up in the shares — a climactic run — as the 16 P/E is just too low.
Power Ranking Bottom Line
Growth Portfolio

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Apple is the top stock in the 21 stock Growth Portfolio and the 10 stock Aggressive Growth Portfolio. With a 16 P/E and 75% profit growth, this is the best investment opportunity I’ve ever seen.
Aggressive Growth Portfolio

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