The old Wall Street expression I have heard a million times, mostly in the negative camp is "the company has too many moving parts." Well, the same can be said about Apple Inc. (NASDAQ: AAPL), but only in the positive camp. So as Apple hit a new 52-week and all-time high of $119, what is going on? Let's look briefly at all the "moving parts."
Yesterday, it was announced that Apple stock will be included in the S&P 100 as of the end of trading today. It's definitely a prestigious move for Apple, and one the company did not have to request. S&P determines who the member companies will be. Many structured portfolios must buy the shares to keep up with the 100 stocks in the index. Typically these funds finish this chore within three days of the announcement. Apple traded 52 million shares on Wednesday, twice its normal amount.
Apple announced that its Apple TV will soon have the capability of offering the ever-popular YouTube internet video site on its Apple TV set-top box. This is another confirmation of the growing and consumer-driven philosophy at Apple. If the consumer wants it and the addressable market is large enough, Apple will offer it and probably dominate.
This month coming up will be the roll-out of the much anticipated Apple iPhone. The write-ups and the attention will be extensive. In the words of one of my former portfolio manager clients "you couldn't buy this advertising." The coverage will be coast-to-coast and the early adopters will find themselves quoted and questioned a lot. Not to mention the visible revenue and earnings driver the iPhone will help contribute too. Although Apple will recognize the iPhone revenues over 24 months ratably, the visibility will be well known and understood by the investing world. The company has established what many feel is a conservative goal of 10 million units delivered to customers by end of 2008.
We'll see. It could prove to be very conservative.
The iPod continues to capture and hold market share of the MP3 market. The share for Apple is north of 70% -- a stunning number for a product playing in a growth market. The updated Mac is selling extremely well, as is the attendant and necessary software. This too is driving profitable CPU sales.
Finally, Steve Jobs, CEO of Apple appeared at the worldwide developers conference D: All Things Digital conference on Wednesday and crystallized the Apple story. He expressed huge excitement about some new iPods coming to the market "in the near future." All in all, quite a conversation Steve Jobs held with the moderator.
The company is entering a renewed phase of growth that could have analysts bumping up the revenue and earnings estimates for the next couple of years. A lot of moving parts ... moving in the right direction. As I wrote last week, I believe Apple will surpass IBM (NYSE: IBM) in market capitalization over the next two or three years.
Georges Yared is the CIO of Yared Investment Research where he explores more growth stock ideas.
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Reader Comments (Page 1 of 1)
5-31-2007 @ 10:27AM
forty2 said...
Actually, the Apple world-wide developer conference starts June 11. The thing yesterday was some fancy industry gabfest.
And don't expect the iPhone release at WWDC. Updated Macs sure, new iPods probably not, but the phone ship date is not tied to WWDC.
5-31-2007 @ 11:23AM
Beltway Greg said...
Once again, thanks to the analysts at Citi for downgrading Apple proving Gecko correct: "Analysts don't know preferred stock from livestock."
And, doesn't somebody owe me a cool million? Please don't ask me to make predictions I only cash the checks.
Beltway Greg