By Jordan Faigen
An apple a day keeps investors on their feet.
Apple in the News
It seems as though Apple Inc. (NASDAQ:AAPL) likes to stay at center stage. First they announce the addition of a smart watch to their latest line-up. And now this…
According to the latest Apple Inc. (NASDAQ:AAPL) rumor, your trusty iPhone might come in handy around the house more than you ever thought.
The Financial Times reported that Apple plans to announce a smart home platform at the World Wide Developer Conference (WWDC) on June 12. According to the report, you will be able to automatically turn on lights when you just walk into a room with an iPhone present. While all of the features of this new system have yet to be announced, it is being reported that Apple is allowing third-party developers to create products for this new platform. We might soon be one step closer to living like the Jetson’s, but we will have to wait until the WWDC conference for the big reveal of the future.
A Financial Expert’s Opinion
Seeking Alpha contributor, Alex Cho, recently recommended BUY Apple Inc. (NASDAQ:AAPL) on May 26, noting that Apple will be taking over market share in the second half of the year. Samsung has gained some of the market share since the holidays, possibly due to promotional activity around the Samsung Galaxy S V launch. But, Cho is confident in the purchasing power of teenagers, noting, “At the present moment, teenage ownership trends of the iPhone have continued to trend higher with more than 60% owning one” and, “approximately 65% of non-tablet owners amongst teens plans to buy one, this puts a theoretical limit of 86% market share for the teenage demographic.” He also pointed out that, “Another interesting data-point was mentioned in the Piper Jaffray research report. Approximately 20% of the teenage demographic in the United States would be willing to buy an iWatch for $350.” Based on this rationalization, Cho is, “convinced 2014 will be a pivotal year for Apple.” Cho says, “I’m convinced Apple will reach my $653 price target for 2014. The sentiment around the stock has certainly improved, and with upward trending profit margins paired with rising revenue, there’s no way in heck Apple will miss analyst expectations.” Cho has a +7.3% average return on the stock.
Alex Cho’s Past Apple Recommendations
Cho has recommended Apple Inc. (NASDAQ:AAPL) in the past, helping him earn an overall +18.0% average return per recommendation and a 66% success rate of recommendations. In this week’s Throwback Thursday, we take a look at his past Apple recommendations to see how he earned his high return.
In February of 2013, Cho recommended BUY Apple, noting, “Apple is a compelling investment that investors should stay invested in.” Cho went on to add that he believes, “Apple will add hundreds of billions in market capitalization over the next five years.” Cho argued, “I remain highly confident in Apple Inc. (NASDAQ:AAPL) . The company’s operation generates a substantial amount of cash flow. Management is competent and will sustain a reasonable rate of growth for investors.” The company has also powered through even hard economic times, “the business has a unique business model because it is able to grow earnings even through economic recessions.” The stock increased from $446.15 at the time of this recommendation, to $479.56 at the time of his next recommendation in October of that year.
On October 1, 2013, Cho reiterated his BUY Apple rating, noting that the stock is undervalued. Cho pointed out that, “Apple seems to lead the way when it comes to price-to-earnings, price-to-sales, and price-to-earnings growth. Apple Inc. (NASDAQ:AAPL) has a current ratio of 1.9, and $176 billion in total assets.” He added that, “Apple’s financial position isn’t fully appreciated by the markets. Remember, in just a year or two, total assets will total above $200 billion. Currently the stock trades at a $438 billion market capitalization, so if anything, half of the market capitalization is already supported by collateral.” Looking to the future Cho argued,” I expect 2014 will be a much better year for Apple investors due to earning per share stabilization due to share buybacks, and improving unit sales of its low-end products.” Following this recommendation, Apple stock jumped from $479.62 to $554.58 by December 31.
Cho also spoke about Apple earlier this year in March, speaking highly of the company’s smart watch project. Based on patent filings, Cho is fairly confident that Apple’s next wearable endeavor will be the iWatch and is already projecting success, “Therefore, I expect Apple’s iWatch to generate $2.5 to $5 billion in net profit by 2018. This was based on historical run-rates of Apple’s product launches and industry projections for mobile. While the future may not exactly turn out like this, I couldn’t imagine Apple losing money from its upcoming product category.” The stock went from $598.31 in March to $625.63 today.
Cho clearly believes that Apple Inc. (NASDAQ:AAPL) is a leader in the future of technology, but where will this technology take the company’s stock? Investors will just have to wait for the next technological advancement, just around the corner.
Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]