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I am generally in favor of the recent cash-management activities. If Apple stays pinned at 450 or lower, it will save the company a ton of money. If Apple actually finds a home much higher than that where it belongs, it still provides a great deal of flexibility to do a lot of different things with all that cash. I will make a note about the recent $240 Apple stock target by a relatively unknown investor. I have never seen such poor analysis, masked as a numerical analysis in my investing tenure. Summary: Apple has high margins. I'm going to pretend that it doesn't. If Apple had significantly lower margins, they would be worth $250. Therefore they are worth $250. It has been a long time since Apple introduced new products. Some Apple "investors" are restless and bored and many of them are chasing some other bright shiny things now that Apple isn't as sexy. Long story short: I think the cash management should keep Apple pinned near $450. If the predicted pipeline begins to produce new products in Q3 and Q4 and beyond as promised by management, Apple will regain the "sexy" and we'll see it approach it's value sometime toward the beginning of 2014. I do think they will see some continued margin erosion on mature products, but that is priced in and then some. Apple Price Target: 650
I like the parameters of the new China Mobile deal quite a bit. Every negative analyst reviewo of deal continues to site "unknown" or "lower projected" margins, yet the price point for the Iphones represent typical Apple margins and the demand is high, based on pre-sale numbers. However, I had priced in a deal with Mobile that was slightly less favorable....so I've modified my expectations upward slightly. I think most "analysts" of Apple are being extremely conservative on their numbers on projected earnings impact from Mobile and then they are applying a weak multiple on top of those already conservative numbers. Most are projectiong an earnings impact ceiling of .04 I see that as a floor with a range extending to around .08 I also think that Apple had a slightly more successful holiday season than was expected. All reports are that they are maintaining market share much better than most had expected. I had expected some introductions of at least one significant new product by this point in the timeline, but the China Mobile deal is a very big deal. Minor move in my price target to 680 to adjust to a favorable and well-received China Mobile partnership and at least flatline U.S and world economy. Still expect Apple to introduce new products this year that will move the bottom line, but I am only partially reflecting that in my price target.
The China Mobile deal is finally starting to hit the books in a positive way, and the share buybacks really had a solid impact on earnings per share. Additional buybacks continue to be an attractive feature. Apple continues to do all the right things in terms of money management. Still no new game-changing products, but there are a lot of things to really like. 1) Huge earnings beat. 2) Lots of acquisitions = continued innovation3) Lots of Iphones and IpadsI love a stock split for a stock like Apple. Since I feel that the stock is significantly under-valued, getting the stock out of a mental price rut is a huge advantage for them and opens up some additional catalysts.1) Investors will be forced to find a new price target based on impressive fundamentals.2) It will introduce more option-block investors3) It will introduce smaller investors4) It will allow for realistic dividend reinvesting5) It opens the door for inclusion into the DOW, which would introduce mandatory fund-buying from DOW-matching funds as a catalyst This will provide something to keep the stock attractive instead of a constant impatient wait for new products as a catalyst for price movement. Price target post split = 100
Apple acquired Beats for $3 billion. What does Apple get for its money? In order of importance....TalentApple wanted Jimmy Lovine and Dr. Dre to lead the charge in digital music. Their subscription vision is a perfect match for what Apple need to accomplish in digital streaming. Lovine and Jobs had a really good relationship and respected each other greatly. Lovine and Dre will be able to step in with Eddie Cue and drive the next vision of digital music for Apple. Lovine is the best possible choice for this. Lovine, perhaps one of the most connected leaders in the music industry, chose Dre as his partner due to his connections to the music and sports industry and the ability to sell cool. Some people have complained that Apple had lost some of it's "cool". Beats Music -- Subscription ServiceApple gets a strong building block in an area that they have ignored. Apple is significantly behind in digital music subscription streaming. Beats provides a strong footprint to build upon. This is an area of tremendous growth potential for Apple in the music vertical. Picture this vision -- Apple can play what I really want to hear whenever I really want to hear it. Cool. Beats Electronics -- Estimated $1 billion in revenue on high-margin headphones. In the near-term, Apple is going to get some return on its investment on actual earnings. We won't know for sure what the actual earnings will be from this segment of the purchase. 3-1 price to sales seems high, but if the margins are as high as expected, the money-making portion of the business is a reasonable return on the investment. It's really just icing on the cake the Apple will make some money as part of this purchase.
China Mobile continues to show its value to the bottom line, as predicted. This quarter's earnings is good confirmation. Analysts have been slow to accept the value of that deal, but the continued bottom-line proof that China Mobile is a big deal has finally been reflected in the stock price. Despite a ho-hum earnings report, the AAPL price continued to reflect the near-term momentum, and I believe that is because the last of the holdout analysts have finally accepted that China is a large growth engine for I-phones. The IBM deal isn't quite as big as the China Mobile deal, but it is a really big win for Apple. Mobile computing continues to change the way that businesses function, and this deal will continue to accelerate that change. The market's lukewarm response is not surprising, but it is inappropriate. Like the China Mobile deal, analysts are unsure about the effects of the deal, so they are erring on the conservative side......again. This deal will move the needle again. I think there has been some pent up interest to get into Apple stock prior to the I-Phone 6 and I-Watch that are queued up for the latter half of the year, but there was no pullback after this quarter's earnings to provide an entry point. Price Target = 115
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