Apple Inc. (NASDAQ:AAPL) stock has an above average chance of hitting the $1,000 per share mark, according to Nigam Arora’s ZYX Change Method. According to AroraReport.com, the ideology behind the Methodology is that the opportunities to generate outsized alpha (Alpha is the return in excess of compensation for the risk.) abound when Change is occurring.
Nigam Arora in his Article published at market Watch claims that he has been a bullish follower of Apple Inc. (NASDAQ:AAPL) since the time the stock was trading at $131, and has since seen a majority of his Arora report subscribers partially cash in at various price level of the stock.
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Arora further elaborates on the method used in predicting the 55% chance of Apple’s stock price hitting $1,000 per share in his website, saying, “the highest alpha is generated when a trade is entered, just prior to the early recognition of a change by the market participants. Such an entry lowers the risk, because close stops can be entered and typically stops do not hit.” More about the method can be found here.
According to the Market Watch report, Apple has a very slim chance of hitting $1,650 in the near future, which is the highest target with some market quarters. Indeed Arora compares it to a “pipeline dream”, claiming that a simple analysis would easily indicate so. The high target is typically perpetrated by sell side analysts, who try to woo investors into buying the stock without looking at obvious pitfalls that surround the stock.
Nigam’s simple analysis indicates that, at $1,650 per share, apple Inc. could be worth approximately $1.55 trillion, a figure that would depict that Apple sales notch up $621.44 billion. Arora estimates 250 million customers to drive this kind of sales, year in, year out, for Apple, which would mean that, every customer consistently spends nearly $2,500 on Apple products.
Apple Inc. (NASDAQ:AAPL), has 941,572,000 shares outstanding, and at a price of $1,650; this would translate to 2.5X of the company’s sales. The company earns over 86% of its revenues from the sale of Macs, iPhones, and iPads, while iPod, iTunes, peripheral, and software sales produce 5.46%, 4.37%, 1.65%, and 1.82% respectively. Additionally, analysts are of the opinion that 83% of future revenues will be generated from the sale of iPhones and iPads. The tablets and iPhones industry has in the recent past, been attracting a lot of players.
Microsoft Corporation (NASDAQ:MSFT), Google Inc (NASDAQ:GOOG), and now the rumored 2013 Facebook Inc (NASDAQ:FB) smart phone, all present a challenge that cannot be swept away. Furthermore, Samsung Electronics Co. Ltd. (LON:BC94), HTC Corporation (2498.TW), Nokia Corporation (NYSE:NOK), and Research in Motion (NASDAQ:RIMM)’s BlackBerry, are still out there challenging, despite some of them facing difficult times.
It is, therefore, rightly so, when Arora connotes, “our focus is generating high risk adjusted returns, i.e., returns in excess of those commensurate with the risk taken.” This takes into consideration risks associated with competition, among other micro and macro economic challenges.
Nevertheless, Arora is cautious over the continued holding position on Apple stock. He says, “although we continue to recommend holding Apple, we have also been steadily taking partial profits. The reason is that the risk-adjusted potential return on Apple is now lower than many other opportunities available in the market.”
At the time of this writing, Apple Inc. (NASDAQ:AAPL) stock was trading at approximately $622 per share, nearly $1.00 down or 0.12% decline from yesterday’s close.