Friday, March 2, 2012

Apple should be $600 / share

Apple is a steamroller. Unstoppable. It should be trading at $600/share right now. Plus the Ipad 3 is coming out and the author sees Ipads becoming an executive "must have".

The author has entered the following position.

Buy Apple Oct $555 Call $47.65
Sell Apple Oct $560 Call $45.30

Let me show you what has made me go crazy about Apple.

Here is the deal, all last year it was making $6B a quarter for a total of $27B revenue (average) / $6B in earnings growing at 40% rate.

Then came the new Iphone 4S last quarter, and then in one quarter it went to $46B revenue / $13B in earnings in one quarter. That blew the hinges off of any previous valuation. Assuming no growth and continued earnings they will make $52B in earnings this year and thus with a $470B market cap sell at less than 10 X earnings. Now think of the fact that they have $80B in cash on the balance sheet and they are selling at 8 X earnings.

If we get into normal valuations of 20 X earnings against 40% growth this is a $1T stock.

All this and the iPhone is still limited to 10% of the population in China because they have only one carrier, like the AT&T deal from two years ago.

This said, the stock has run really far really fast and should plateau for a bit. But it is going up from here.


Lockstep said...

Easy call. If they were all this easy....

BTW, the patent case win will propel the stock for another year or so at least.

Lockstep said...

This one is about to expire. Looking good. A solid double.

Lockstep said...

This position expired, accruing $5.

$2.35 invested and $2.65 in profit returned (112%). Not bad.


I would take a pass on apple. Its a funny thing you never hear a sole in the business news talk about how low the stock traded for in december of 1998 3.56 cents a share.