Apple stock is enjoying huge investor confidence following record earnings, but experts view the stock cheap considering the prospects ahead
Apple stock is still cheap despite a good run this year, Citi’s director of investment research told CNBC on Wednesday following the record $18 billion in quarterly profit posted by the iPhone maker. By posting record first quarter numbers, Apple has given a befitting reply to those anticipating a decline in the popularity of its products, said Jim Suva.
Lunar New Year to drive sales
Despite a dream run, the stock appears cheap, Suva said, noting that it is trading at 10 times earnings, excluding the company’s cash pile. Additionally, Suva believes that some seasonal effect will be there in the current quarter, but the Lunar New Year will likely drive sales.
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
“In fact we saw that they actually beat expectations by over 10 to 13% based upon sales, units and earnings, and we are seeing it start to break out,” Suva said in a Squawk on the Street interview.
Blair stated during CNBC’s Squawk Box that handset makers should be ready to see their market share in the region contract as the iPhone is set to dominate the larger part of the market. He further said that the strong performance from Apple will continue to a high level for the rest of the fiscal year “but that share will come from somewhere, and it needs to come from Android, who holds the market.”
Can Apple maintain the growth rate?
Rosenblatt Securities managing director Brain Blair has assigned a Buy rating to the stock and expects a strong next quarter. Blair believes Apple’s profit will not be in line with estimates for the fiscal first quarter but that analysts are once again underestimating the company’s prospects.
Analyst Stuart Jeffrey from Nomura said it is important to know that what resulted in the incredible growth in the previous quarter, whether it was handset upgrading or market share gain at the expense of Android. Jeffrey notes that if the gain came at the expense of Android, then Apple could maintain the growth for many more years.
According to Thomson Reuters, the results were so strong that they added 110 basis points to the S&P 500’s earnings growth for the quarter. The company shipped around 9 million more iPhones than expected and has enough cash to buy 480 of the S&P 500 companies outright. Apple’s record results were primarily the outcome of a 70% rise in iPhone sales in China.
On Wednesday, Apple shares closed up 5.65% at $115.31.