Wednesday, June 11, 2014

Apple Price Target Hit: Heading Toward Exit, Away From Unknowns

     Apple (AAPL) recently hit our price target of $652.05 issued back in December 2013 ($93.15 post split). At that time, we argued that the company offered good value to investors from multiple catalysts. Share buybacks, dividend policy, and cash flow became the focus of investor activist and shareholder Carl Icahn and subsequently Apple's CEO Tim Cook took measures to satisfy these demands.
     The focus now for AAPL has turned to innovation and growth. Apple is slated to grow earnings between 8-10% in 2015. The firm yields 2% and trades at 15.7 times current year earnings. Without quantifiable estimates of the market size and market share Apple expects to garner from new products such as wearable devices, there are too many unknowns to assign a higher price target at this time. Apple is also gaining a strong competitor in its cash cow smartphone category with the entry of Amazon, who has established an existing hardware capability in its Kindle e-reader products. An additional concern raised is that Apple was too slow in responding to the consumer demand for larger phone screens satisfied by its chief rival Samsung.
     As highlighted, in the face of several areas of uncertainty, we are ending coverage of the Apple at this time since it now trades at over one and a half times its expected 1 year earnings growth rate. We believe this is fair market value for the stock has been reached. If Apple can generate enthusiasm for a new groundbreaking product and parlay this development with its retail investor friendly and recently completed 7-1 stock split, prices of $100 or higher could be printed in the coming months. But as we mentioned, there are too many show-me moments ahead for the Cupertino, California tech giant to warrant assigning a new higher price target rooted in speculation.


Foundry Stock Review has a long call position in Yahoo (YHOO)  as of 6/11/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.


Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.
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