AmTech ups estimates as Apple market cap surpasses Intel and IBM
Shares of Apple were trading up $12.19 or nearly 7 percent to $186.55 on the Nasdaq stock market in early morning trading following a stellar fourth fiscal quarter that beat Wall Street's consensus estimates hands down.
With nearly 870 million shares outstanding, the Cupertino-based firm's market capitalization now stands at nearly $162 billion, surpassing Intel at $155 billion and IBM at $157 billion. Apple's perceived market value is rapidly closing in on Google ($200 billion), but remains quite a ways behind Microsoft ($290 billion).
In a research note released to clients early Tuesday, American Technology Research analyst Shaw Wu said shares of Apple are poised to trade even higher over the next six to twelve months.
He raised his fiscal year 2008 earnings estimate to $5.00 per share on sales of $30.4 billion (up from $4.55 and $30 billion) and also increased his 12-month price target to $210 from $185.
In addition, Wu used the research note Tuesday to introduce his first estimates for Apple's 2009 fiscal year, which currently forecast per-share earnings of $5.70 on sales of $34.5 billion.
For Apple's current December quarter (fiscal Q108), the analyst is modeling for per-share earnings of $1.50 on sales of $9.2 billion, which factor in expected sales of 2.3 million Macs, 24 million iPods and 2 million iPhones.
"In our view, Apple's move to subscription accounting in its new, high-growth business areas, iPhone and Apple TV, may signal that earnings-per-share (EPS) is not the best way to value Apple shares. This is because EPS is amortized and understated on a quarterly basis while cash flow remains the same," he wrote.
"Therefore, cash flow from operations may be a more appropriate way to value Apple shares. We see upside in Apple shares to $210 in 6-12 months based on 26 times our calendar year 2008 FCF (free cash flow) estimate of $7.50 plus $17 in net cash."
16 Comments
"In our view, Apple's move to subscription accounting in its new, high-growth business areas, iPhone and Apple TV, may signal that earnings-per-share (EPS) is not the best way to value Apple shares. This is because EPS is amortized and understated on a quarterly basis while cash flow remains the same," he wrote.
"Therefore, cash flow from operations may be a more appropriate way to value Apple shares. We see upside in Apple shares to $210 in 6-12 months based on 26 times our calendar year 2008 FCF (free cash flow) estimate of $7.50 plus $17 in net cash."
[ View this article at AppleInsider.com ]
[ Digg this story ]
I am afraid this guy needs to to better. EPS is never "the best way" to value any shares. Forecasting an EPS and slapping on a P/E multiple is a slightly lazy, and somewhat short-handed, back-of-the-envelope approach to valuation, and should not be used in any serious assessment of long-run intrinsic value.
"Cash Flow from Operations"!? Pure nonsense, and a somewhat meaningless metric in and of itself.
The only comprehensive metric that matters for assessing intrinsic value is "Free Cash Flow." Period.
Anantksundaram,
So how would you, personally, evaluate Apple's stock? What are your thoughts?
steve
Apple is Doomed!!
Anantksundaram,
So how would you, personally, evaluate Apple's stock? What are your thoughts?
steve
Not to be coy or cute-sy or anything, but there is this old saying about there being only two rules to successful investing: Rule #1 is "never reveal everything you know."
That said, while I am quite happy to do a quick-and-dirty generic tutorial on biz valuation, it will move people to tears of boredom! But let me recommend an outstanding link:
http://pages.stern.nyu.edu/~adamodar...uation/val.htm
Not to be coy or cute-sy or anything, but there is this old saying about there being only two rules to successful investing: Rule #1 is "never reveal everything you know."
That said, while I am quite happy to do a quick-and-dirty generic tutorial on biz valuation, it will move people to tears of boredom! But let me recommend an outstanding link:
http://pages.stern.nyu.edu/~adamodar...uation/val.htm
First of all, most advisors, if they hold a stock, want others to share in the glorious news of its value in order to induce them to buy and so drive the price up.
Second, That page is a swamp of confusing references. Too much for me to navigate.
Third, I wasn't asking for the method of evaluating stocks. I was asking for YOUR EVALUATION of Apple. In other words, your conclusions about Apple using whatever method of evaluation you choose.
thanks!
Steve