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Apple still in sweet spot ... next stop: $240

Posted Oct 22 2007, 06:49 PM by Jon Markman
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Apple reported a huge third-quarter number after the bell today, surprising bulls and panicking bears who have sold the stock short. The Cupertino, Calif., company said it earned $1.01 per share on $6.2 billion in revenue. Consensus expectations were for an 84-cent quarter on $6.06 billion in sales.

How big a surprise was that? As I have explained to readers in the past, the quick and dirty way to figure out the “expected surprise” for a stock is to visit its Earnings Surprise page on MSN Money. There you will see that in the past four quarters, Apple has surprised by 22.7%, 24%, 46%, 38% and 29%. So today’s 20% surprise was on the low end, but good enough for a company with a $150 billion market cap. 

Looking forward, Apple executives tried to sandbag analysts with lowball guidance, stating that they expected to earn $1.42 in the first quarter -- just a touch better than the $1.40 expectation. The company is really in a sweet spot now because it is getting a premium price for its personal computers, MP3 players and phones at a time when all of its competitors are discounting like crazy, and at the same time it is benefitinig from lower input costs such as flash and hard disk memory.

While the buzz for Apple has centered on the iPhone, once again the real money at the company is coming form Mac products and services, as shipments came in at 2.16 million vs. expectations around 1.9 million. If you're keeping score, Macs amounted to 61% of total revenue in the quarter.  In other news, European sales were much better than many analysts expected; iPhone sales came in at $1.12 million vs. Wall Street expectation around 980,000; and gross margins, which had been a worry, were just fine at 33.5%, vs expectations around 33%.

During the broad-market weakness last March, I recommended the stock at $90 in my Supermodels column and put out a $225 target for 2008. I am now going to lift my 2008 target to $240, which is 40 times my 2009 earnings estimate of $6 per share. Shares were trading around $184 in the after-hours market tonight.

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Comments

 

apple exemplifies creativity and vision.  that is a combination that will continue to take the company to new heights.

bobbie

bobbie (Posted 10.23.07 5:13 PM)

GGO APPLE!!!! Lets just home next quarters expectation are not to high.

Jeremy (Posted 10.23.07 5:53 PM)

Apple depends on robust consumer spending to continue to grow. If we are indeed heading for a Recession... Consumer electronic spending should decline greatly. I think Apple is a good company, however I don't believe it would weather a slow down in consumer spending better then Cisco and HP.

Stephen (Posted 10.23.07 6:12 PM)

Insiders are buying calls for 08/09  .This stock will hit U$250 for 2008

U$350 for 2009 and U$475 in year 2010

there are new products that will add a lot of revenue in the botton line, 2 diferents new iphoneswill come up during 3 quarter2008, plus royalties of the phone contracts all over the world estimated 10% market share for iphones 2010, New Plasma TV, 650 New Stores projected, Apple is investing in the new spectrum and have a plan to deliver internet content compiting with Akamai Tech And Lime Light .Computer Market share up to 8% in 2007 9.2 to 10% in 2008 and 13% in 2010

,

so invest 1000 in options in Apple now and make 25.000 in 3 years

Anyone who see this will remember me in 2010                      MURCIELAGO

Murcielago (Posted 10.23.07 6:24 PM)

What do you all expect   Steve's back and Apples up

Norma Campbell (Posted 10.23.07 7:01 PM)

my old PC laptop died. I bought a mac book pro, it came with everything i needed, and everything else google offers for free. I put boot camp on it, and now run windows apps on the mac.  

People dont yet understand how powerful and amazing this is!  

I got everything i need on one machine, out of the box. I have two ipods, and the airport was the only of wireless devices i tried that actually worked. I tunes is the best thing that has happened to me and the music biz in years.

I look forward to getting a new imac for xmas, a new nana, and the itv device.

I love apple so much i bought an ipod to give away to fans of my record label!

www.technorganicrecordings.com

technorganic (Posted 10.23.07 7:10 PM)

I believe what Apple has repeatedly done is to manage the expectations of Consumers and Investment community.  They have done this well through carefully articulated and calculated press releases.  Above all, the company is performing well across Technology, Products and Users Experience.  Additionally, the companies Fundamentals and Ratios are very strong!

Barry Rahimian (Posted 10.23.07 7:49 PM)

Simply put.........Apple makes products that people want. The vision and execution will continue. My projection.......Apple will be a $300 stock my the end of 2008. Enjoy the ride!  

Gary (Posted 10.23.07 7:55 PM)

aapl will is the stock to have do not miss this train ride

ron (Posted 10.23.07 8:34 PM)

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