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Technology Stocks : Apple Inc.
AAPL 273.85+0.5%Dec 24 12:59 PM EST
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To: Ryan Bartholomew who wrote (165505)2/6/2014 5:43:13 PM
From: slacker7112 Recommendations

Recommended By
pyslent
Ryan Bartholomew

  Read Replies (2) of 213177
 
Interesting. Are you assuming expenses won't climb? I'd be interested to see how you arrive at a higher number. If you can convince me that something higher than $20/share is the worst case scenario, it would change my downside risk analysis

Your premise is that they continue to only concentrate only on the high-end of the market while stabilizing margins and that can result in 15% share. That is pretty much exactly what happened in 2013. They sold ~155 million iPhones which is around 15% of the smartphone market and they earned $40 a share. Margins and ASP's stabilized by the end of the year and their unit growth slowed....sounds very much like your advice to Apple.

Now iPad unit shipments would need to contract a bit to hit 15%, but not much considering the rate of growth in that market. They are also likely to lose the lowest margin units in your scenario (the Mini) since they are only appealing to their existing niche buyers.

They will earn far more than $20 a share shipping 150 million iPhones and ~50m iPads as a steady state scenario.

Right now, I'm a buyer in the upper $200s.

Well, we have managed to get you up from your initial target of $200 :-).


$135 in cash after discounting overseas cash. A $20 steady state earnings clip, an ex-cash PE of 6-8, and the cash generated in the next few years before they hit $20 in earnings is still going to get you a price of at least 300.


Slacker
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