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STP – 094 ………………………………………Posted: April 29, 2010
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Apple’s Innovative Products Power Higher Revenues and Earnings
We commented on Apple in our April 6, 2010 post entitled, “Apple’s iPad is a Game-Changer!” That was several days after the new iPad product had been introduced. In the next two weeks or so, Apple announced that it had sold over 500,000 iPads in one of it’s fastest launches ever. Thus, we continue to believe that our initial assessment of the iPad is correct, i.e. — it is a game changer!
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Apple iiPad
On April 20, 2010, Apple reported a very strong financial quarter, one that greatly surpassed analyst’s estimates. For the second quarter ended March 2010, Apple reported that:
1. Revenue rose 49% to $13.5 billion.
2. Earnings rose about 90% to $3.0 billion.
3. Powering these impressive results were iPhone sales. Apple sold 8.75 million phones, up from 3.8 million a year earlier, a gain of 130%. Analysts had expected 7 to 7.5 million phones would be sold.
4. Apple reported that iPhone demand was particularly strong in Asia and Europe. Also, iPhone sales in China increased by nine times.
5. Apple also sold 2.9 million Mac computers in the quarter, up 33% from the 2.2 million a year earlier.
iPhone 3G (s)
Looking ahead, iPad revenues will begin to add to revenues in the current quarter and for the rest of the year. Steve Jobs, CEO, stated that “several more extraordinary products will be announced later this year.” One of these is expected to be a new iPhone coming in July.
iPod Nano Assortment
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Evaluating Apple’s Share Price
On April 27th, Apple’s stock closed at $262.
Currently, the average EPS estimate for 2010, among 44 analysts covering the company, is about $13.00 per share. The current year P/E ratio, therefore, is about 20.2 times earnings. This appears to be a very reasonable valuation for a company whose earnings growth this year is likely to be somewhere between 30% to 40%.
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Assuming the lower growth figure of 30%, the PEG Ratio is 20.2 divided by 30, or about 0.67. In other words, the P/E ratio is only 0.67 times the conservatively estimated growth rate. Again, this is a very reasonable valuation for a dynamic growth company such as Apple – even at today’s $262 price!
We still like the company and the stock.
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DISCLAIMER:
Our sources of information are believed to be reliable, but they are not guaranteed to be complete or without error.
StansTake.com is not a registered investment advisor. Nothing contained in any of this material should be construed as a recommendation to buy or sell securities.
Opinions or suggestions are given with the understanding that readers acting on information herein assume all risks involved.
In addition, we highly recommend that readers do their own investment research or seek advice from registered investment advisors on subjects commented on above.
The editor of Stanstake.com owns shares in the Apple Company.
