The Levee Broke at Apple

Stock (Symbol) Stock Price

Apple (AAPL)


Data is as of Expected to Report Sector

August 3, 2011

Oct 18


Sharek’s Take
David SharekBusiness is booming. Apple sold 20 million iPhones last quarter, up from 19 million a quarter ago. Come December, the company could be pumping out 30 million iPhones in a quarter, way over than the 22 million estimate. AAPL sold 7.5 million iPads, up from 4.7 million two quarters ago. iPads sold out last quarter — sold out. They sold every one they could make, and need suppliers to step up their game.

The next catalyst for Apple is iCloud. Due out this fall, iCloud will alow people to access iTunes songs on any device. For $25 a year, you can listen to music you got somewhere else. iCloud gives you free storage for anything purchased from Apple (books, music, apps) and 5 gigabytes of free storage for documents, email and backup files. Apple will be leading the cloud.

One-Year Chart

Apple just had its best quarter ever — and the stock hit an all-time high while getting cheaper as well. Last quarter my AAPL article was titled “The Levee has to Break” and this quarter it broke — AAPL broke out to an all-time high. With business booming and a P/E of only 12, this stock has the ability to make a ferocious move higher.

The one-year chart shows AAPL broke out to $400 and has a cheap 12 P/E to go with 122% profit growth last quarter. AAPL’s fiscal year end is September 30th. Since we are less than a quarter away from the year end, I’m looking ahead to next year when calculating a P/E. AAPL’s P/E is now only 12, less than the 14 it had last quarter and the 16 it had the prior three quarters. So AAPL is getting cheaper.

Earnings Table

This quarter’s earnings table is the best I have seen from AAPL. Profit growth was 92% 2QtrsAgo and accelerated to 122% LastQtr. Revenue growth the last seven quarters: 32%, 49%, 61%, 67%, 71%, 82% and now 82%.

AAPL has been crushing estimates for so long, its now a given that it will happen. LastQtr the company beat by 220 cents — that’s two dollars and twenty cents folks — the best beat-the-street I can ever remember by any company

Annual Estimates are growing like weeds. This is outa control. Roundup has met its match. When AAPL closes the fiscal year in September, it will likely beat 2011 estimates set a year earlier by 50%. So the company will likely make 50% more than we thought it would.

Quarterly also look the best I have seen from this company, which always tries to low-ball analysts on how much it will make. Nibble on this: 42$ profit growth is expected the next four quarters. These estimates have been getting jacked up. AAPL has been beating the street for years. What will profit growth actually be when its all said and done?

Fair Value
What’s so amazing is this stock is selling for 12 times earnings. AAPL is worth 35 times earnings. These Fair Values show high upside — $1000 isn’t just achievable, its probable.
Ten-Year Chart
Apple’s ten-year is almost picture perfect. I like that the stock hasn’t made a parabolic move higher, that could be coming. 81% profit growth is expected this year. Apple stock has compounded at 45% a year during the decade.
Power Ranking Bottom Line
Growth Portfolio

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Apple is set up for a parabolic move. In fact, that move may have already begun. This is the best stock around. It has triple-digit profit growth and a P/E of only 12 — 12? Although this is my top holding I will add to my position today. I think this is the best opportunity I have had in my lifetime.

AAPL is hands-down the top stock in the 20 stock Growth Portfolio and the 11 stock Aggressive Growth Portfolio Power Rankings.

Aggressive Growth Portfolio

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