Can Apple's Stock Still Shine Without Jobs? By KEN HOOVER, INVESTOR'S BUSINESS DAILY
Posted 08/25/2011 07:06 PM ET
If there were a Hall of Fame for winning stocks, Apple ( AAPL) would surely be inducted.
And just-resigned Steve Jobs would be its most valuable player.
Apple's share price has climbed 6,260% from a low on April 17, 2003, just as it was engineering its turnaround from the wreckage of the tech bubble.
That price gain puts Apple in a league with the great growth stocks of the past three decades, along with Cisco Systems ( CSCO), Microsoft ( MSFT) and Wal-Mart ( WMT).
Under its charismatic founder Jobs and driven by relentless innovation — starting with the iPod, followed by the iPhone and iPad, all as it polished its sleek line of PCs and laptops — the Cupertino, Calif., company grew earnings at a staggering clip.
Its 2003 earnings were 10 cents a share, adjusted for a stock split. It's on track to finish this year with EPS of $27.42, according to analysts tracked by Thomson Reuters, who routinely underestimate its potential.
Apple rivals Exxon Mobil ( XOM) as the world's biggest company, yet posts quarterly numbers like a nimble new issue. Earnings in the latest quarter were 122% higher than a year earlier. Revenue jumped 82%.
That growth isn't even reflected in the share price. As good students of growth stocks know, the price-earnings ratio of a winning stock is high when it starts its big advance and usually expands 130% over the next couple years.
Apple broke out of the first base in its recent advance on March 4, 2004, with a P-E ratio of 54. Today, its P-E stands at 14.
From that first base, a classic 20-week cup-with-handle pattern, Apple climbed nearly seven-fold. It looked like it had topped when it corrected 42% in the first half of 2006. But it rebounded to a new high in December 2007, just as the Great Recession hit.
The stock fell 61% the next year. That's when Apple showed its mettle. Earnings growth barely slowed, then re-accelerated in the third quarter of 2009.
From a January 2009 low, the stock rocketed 417%.
Is Apple's run finished?
Most of the big winners of the past two years have been pummeled in the current correction — think Netflix ( NFLX), Fossil ( FOSL), Chipotle Mexican Grill ( CMG) and Lululemon Athletica ( LULU). But Apple so far has held its ground.
The stock remains above the buy point of its last base and is finding support at its 50-day moving average line. It is 8% off an all-time high amid an 18% Nasdaq correction.
Even Jobs' exit brought barely a hiccup Thursday: The stock fell less than 1%. That shows mutual funds and other institutional investors support it, despite its big climb and loss of its all-star CEO.
There is precedent for a continued run in history's other big winners. Cisco went public in January 1990 and climbed 3,180% before correcting 54% in a serious market correction in 1994. It looked like it was done.
But its innovative spirit still burned brightly in the second half of the decade, and the stock climbed another 7,785% before finally topping in March 2000.
Innovation drives growth, and if Apple can maintain its creative edge under new CEO Tim Cook, it may find new life just as Cisco and a few others have.
investors.com |
