It Was a Beat, Not a Miss

Stock (Symbol) Stock Price

Apple (AAPL)


Data is as of Expected to Report Sector

October 25, 2011

Jan 23


Sharek’s Take
David SharekApple was thought to have missed estimates by 34 cents last quarter, but it really beat by 4 cents. Analysts got too giddy during the quarter, and pushed their estimates higher ala The Price is Right. Then consumers waited on buying an iPhone because a newer version is coming right around the corner.
Coming this fall, Apple’s next catalyst is iCloud which will allow people to access iTunes songs on any Apple device for $25 a year. You can also listen to music you got from somewhere else. iCloud offers free storage for anything purchased from Apple (books, music, apps) and 5 gigabytes of free storage for documents, email and backup files. What’s getting new now is television Apple is designing which will integrate iTune music & movies as well as WiFi internet with a simple to use controller. Apple’s television was one of Jobs’ last revelations and is due in a year.
One-Year Chart

AAPL tried to break out last quarter, then news of Steve Job’s passing brought the stock down before it regained its footing.
I’m stunned AAPL still is only getting a P/E of 12. Its easily worth 20 times earnings. That’s $680 — that’s 70% higher than here.

Earnings Table

Revenue growth slowed to 39% last quarter. Revenue growth had been accelerating the previous seven quarters: 32%, 49%, 61%, 67%, 71%, 82% and 82%. Still, profits rose 79%.

AAPL beat by only 4 cents after beating the street by more than two dollars two quarters ago.
Annual Profit Estimates increased but not as much as last quarter. Momentum has slowed a little bit.
Quarterly profits jumped — especially next quarter’s estimate. Profit growth is now expected to average 37% the next four quarters (and these estimates are expected to be beat).

Fair Value
35 times earnings may be asking too much. But I’m trying to stay consistent and not let the market dictate what the stocks are truly worth.
Ten-Year Chart
The run higher the past three years has been solid. Upward yet with corrections to take out the weak investors. AAPL just closed the books on 2011: 81% profit growth — amazing. This year profits are set to grow 24% and since AAPL usually beats expectations, 35% growth is possible if not probable. so 35 times earnings does sound about right.
Power Ranking Bottom Line
Growth Portfolio

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Apple continues to innovate. Next quarter’s earnings will probably get a big boost from the new iPhone. After that iCloud and the Apple television will be catalysts for the future. Upside is excellent — the P/E is only 12.
AAPL is the 2nd best stock in both the 21 stock Growth Portfolio and the 12 stock Aggressive Growth Portfolio Power Rankings. Baidu.com (BIDU)
just announced exceptional earnings and looks better right now.
Aggressive Growth Portfolio

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