{"id":28643,"date":"2012-03-28T11:01:25","date_gmt":"2012-03-28T15:01:25","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/28\/whats-next-for-apple-nasdaq-aapl\/"},"modified":"2012-03-28T11:01:25","modified_gmt":"2012-03-28T15:01:25","slug":"whats-next-for-apple-nasdaq-aapl","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/28\/whats-next-for-apple-nasdaq-aapl\/","title":{"rendered":"What\u2019s Next for Apple (Nasdaq: AAPL)?"},"content":{"rendered":"<div align=\"left\"><script type=\"text\/javascript\">\ntweetmeme_style = 'compact';\n<\/script><br \/>\n<script type=\"text\/javascript\" src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\"><\/script>\n<\/div>\n<div><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-28572 \" title=\"What\u2019s Next for Apple (Nasdaq: AAPL)?\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/03\/apple-aapl.jpg\" alt=\"What\u2019s Next for Apple (Nasdaq: AAPL)?\" width=\"220\" height=\"220\" \/><\/p>\n<p>Our analysts were right about Apple (AAPL) declaring its dividend and surging past $600\/share. But how do they feel about the future of Apple?<\/p>\n<\/div>\n<p>All I can say is&#8230; Our analysts are the real deal.<\/p>\n<p>Last year, <em>Investment U<\/em> Associate Investment Director Marc Lichtenfeld and Senior Analyst Steve McDonald made bold predictions about the world\u2019s largest tech company <strong>Apple<\/strong> (Nasdaq: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=AAPL\" target=\"_blank\">AAPL<\/a>).<\/p>\n<p>And already this year, both of their forecasts have come true&#8230;<\/p>\n<h2><strong>Prediction #1: Apple to $600<\/strong><\/h2>\n<p><a title=\"Apple still on course to hit $600\/share?\" href=\"http:\/\/www.investmentu.com\/2012\/February\/apple-to-hit-600.html\">Steve McDonald\u2019s prediction<\/a> came first on December 19th. Here\u2019s the condensed version of what he had to say:<\/p>\n<blockquote>\n<p><em>\u201cA recent survey of buying trends of iProducts for Morgan Stanley by AlphaWise was full of upside surprises.<\/em><\/p>\n<p><em>\u201cThe street may be underestimating Apple\u2019s 2012 \u2018iProducts\u2019 sales by as much as 40 percent.<\/em><\/p>\n<p><em>\u201cIf this survey is even close, Apple at $600 per share is a gimme. You don\u2019t want to miss this one.\u201d<\/em><\/p>\n<p>Of course, March 15th, Apple\u2019s shares hit $600 for the first time ever. They\u2019ve climbed even higher since\u2026<\/p>\n<\/blockquote>\n<p>I had to ask Steve what he thinks Apple will do from here. Here is his gut-felt response:<\/p>\n<blockquote>\n<p><em>\u201cThe reason AAPL is at $600 is Steve Jobs. I have never been a believer in the company, frankly I think it\u2019s mostly smoke and mirrors. They make gadgets, good gadgets but nothing with any staying power, not a <strong>Deere &amp; Company<\/strong> (NYSE: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=DE\" target=\"_blank\">DE<\/a>) or a <strong>General Electric<\/strong> (NYSE: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=GE\" target=\"_blank\">GE<\/a>). If they don\u2019t keep the imagined miracles coming, they will be back in the same toilet Jobs pulled them out of over the last 10 years.<\/em><\/p>\n<p><em>\u201cJobs did a selling job on the world that made PT Barnum look like a chump! Don\u2019t get me wrong, I love a good story, especially when it churns out the kind of money AAPL has, but AAPL is 60% story, 30% gadgets and 20% emotion driven by Jobs\u2019 faithful.<\/em><\/p>\n<p><em>\u201cHere\u2019s what kills me about AAPL.<\/em><\/p>\n<p><em>\u201cTheir products, especially the iPad and their computers, don\u2019t do one thing PC\u2019s and laptops don\u2019t. In fact, in my experience they\u2019re harder to use and have more limitations.<\/em><\/p>\n<p><em>\u201cTheir I phones do exactly what <strong>Research in Motion <\/strong>(Nasdaq: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=RIMM\" target=\"_blank\">RIMM<\/a>) did before them, but Jobs even got folks to buy apps for that, apps that were free on the internet for PC\u2019s, insane!<\/em><\/p>\n<p><em>\u201cBut, and this is the billion dollar but, buyers have been convinced by Jobs and his story that these are new ideas and will do more than other computers. Remember, an Apple laptop or computer is four times the cost of a PC by <strong>Hewlett Packard<\/strong> (NYSE: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=HPQ\" target=\"_blank\">HPQ<\/a>) or any other box manufacturer, and Jobs has people buying them for no other reason than they think they\u2019re on the cutting edge.<\/em><\/p>\n<p><em>\u201cHere\u2019s what I see happening.<\/em><\/p>\n<p><em>\u201cAAPL lost their retail genius to <strong>JC Penney<\/strong> (NYSE: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=JCP\" target=\"_blank\">JCP<\/a>). That will hurt. Jobs is gone. AAPL TV is their last ace in the hole for a long time to come and it has already stumbled once. Competition is coming out of the woodwork for their phones, tablets and laptops. But their biggest problem is the same problem the internet boom had in the 90\u2019s; their buyers are fad folks who will turn away as soon as the next leading edge gadget comes along.<\/em><\/p>\n<p><em>\u201cLook for this to pop with market enthusiasm this year and drop with it, too. Unless AAPL TV is a big \u2013 really big sell \u2013 we could see this stall and correct. I give it a 50\/50 chance of moving significantly higher, say 700.<\/em><\/p>\n<p><em>\u201cWish I could be more specific but it is all up to the tech herd and how they read it, which has never been a reliable indicator.\u201d<\/em><\/p>\n<\/blockquote>\n<p>In his December article, Steve also mentioned that Apple\u2019s low P\/E ratio of 13.8 (as of December 16) translated into a share price of $638. I asked him the likelihood of this happening given current economic conditions:<\/p>\n<blockquote>\n<p><em>\u201cWe would have to get hit really hard this year for economic conditions to significantly affect AAPL sales. We may see a slowing but no big fall. Even during the depths of the collapse we saw decent sales for them.<\/em><\/p>\n<p><em>\u201cBut, Bernanke said the other day the recent strength in the markets and the jobs numbers were just blips. He thinks we are still weak and fragile. I agree!<\/em><\/p>\n<p><em>\u201cAs we speak the PE is around 17. That\u2019s pretty full for this market. Unless we see really big Asian numbers and the TV thing pops soon, the whole thing is questionable.<\/em><\/p>\n<p><em>\u201cWe are in a market period I really dislike; very strong couple of months and very high stock prices.\u00a0 So I am not a total bull on anything right now.<\/em><\/p>\n<p><em>\u201cIf I owned the stock, which I do not, I would have tight stops. I couldn\u2019t recommend buying at this price.\u201d<\/em><\/p>\n<\/blockquote>\n<p>Of course, Marc Lichtenfeld also made a great call\u2026<\/p>\n<h2><strong>Prediction #2: Apple Declares a Dividend in 2012<\/strong><\/h2>\n<p>On December 28th, we sent Marc Lichtenfeld\u2019s <a title=\"2012 Predictions for Income Investors\" href=\"http:\/\/www.investmentu.com\/2011\/December\/2012-predictions-income-investors.html\">predictions for 2012<\/a> to <em>IU<\/em> subscribers. Always in good humor, this is what he had to say about Apple:<\/p>\n<blockquote>\n<p><em>\u201cThere are a lot of <strong>Apple<\/strong><strong> <\/strong>shareholders who are demanding that the company part with some of that $26-billion cash hoard.<\/em><\/p>\n<p><em>\u201cWhile Apple is still growing and innovating, it\u2019s no longer a young company that must clutch its wallet like George Costanza at French Laundry (a $300 per person restaurant in Napa County, California).<\/em><\/p>\n<p><em>\u201cCompared to other tech companies like <strong>Microsoft<\/strong> (Nasdaq: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=MSFT\" target=\"_blank\">MSFT<\/a>) and <strong>Intel <\/strong>(Nasdaq: <a href=\"http:\/\/quote.morningstar.com\/Stock\/s.aspx?t=INTC\" target=\"_blank\">INTC<\/a>), which also have tons of cash but pay dividends, Apple has even stronger numbers and should be able to institute a dividend easily.<\/em><\/p>\n<p><em>\u201cIntel and Microsoft paid dividends equal to roughly 20% of cash flow from operations. It seems like Apple should be able to do the same.<\/em><\/p>\n<p><em>\u201cI wouldn\u2019t be surprised to see $7 billion or so put to work on behalf of shareholders. Some may be used in a buyback with the rest paid out in dividends during a 12-month period beginning in 2012.\u201d<\/em><\/p>\n<\/blockquote>\n<p>On March 19th, \u00a0<a title=\"AAPL to Declare Dividend?\" href=\"http:\/\/www.investmentu.com\/2012\/February\/aapl-declare-dividend.html\">Apple declared a quarterly dividend<\/a> of $2.65 per share beginning this July. On top of the dividend, the company is also going to begin a share buyback plan for $10 billion.<\/p>\n<p>Even though Marc is a very busy guy, he managed to take a moment out of his day to answer a few questions for <em>IU<\/em> subscribers, such as where he thinks Apple is going to go from here:<\/p>\n<blockquote>\n<p><em>\u201cI suspect Apple will become a Perpetual Dividend Raiser \u2013 what I call a company that raises its dividend every year.\u00a0 The current dividend will cost Apple about $10 billion per year.\u00a0 Meanwhile, Apple generated over $17 billion in cash flow from operations \u2013 in just the last quarter.\u00a0 So the company has plenty of room to grow the dividend over the coming years.\u201d\u00a0<\/em><\/p>\n<\/blockquote>\n<p>Marc also predicted Apple will begin a $4 billion buyback with $3.5 billion allocated for dividends. Apple is obviously going at this much more aggressively than originally anticipated.<\/p>\n<p>Does Marc think this is a good sign or bad sign for Apple investors moving forward?<\/p>\n<blockquote>\n<p><em>\u201cA stock buyback reduces the share count, which is positive for investors.\u00a0 However, large cap companies do not have a good track record when it comes to buy backs.\u00a0 They often deploy the capital for a stock repurchase because that capital is available, not because management thinks the stock is a good value.<\/em><\/p>\n<p><em>\u201cIf Apple\u2019s management proves that it can repurchase stock at an opportune time, that will be beneficial to shareholders.\u00a0 But I\u2019d rather see the money committed to the dividend.\u00a0 With its cash hoard and enormous cash flow, there\u2019s no reason why the stock shouldn\u2019t have a 4%+ yield.\u201d<\/em><\/p>\n<\/blockquote>\n<h2><strong>The Bottom Line<\/strong><\/h2>\n<p>Is Apple making the right moves? It seems the company has a lot to prove to our experts. If it continues its tear, it wouldn\u2019t be the first time Apple has negated sound analysis. But also consider this, Marc and Steve have made very lucrative careers out of making the right market calls.<\/p>\n<p>Good Investing,<\/p>\n<p>Mike Kapsch<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=5lHgUFqaYyg:zHVkFn2Lc-8:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=5lHgUFqaYyg:zHVkFn2Lc-8:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=5lHgUFqaYyg:zHVkFn2Lc-8:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=5lHgUFqaYyg:zHVkFn2Lc-8:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=5lHgUFqaYyg:zHVkFn2Lc-8:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=5lHgUFqaYyg:zHVkFn2Lc-8:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=5lHgUFqaYyg:zHVkFn2Lc-8:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=5lHgUFqaYyg:zHVkFn2Lc-8:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/5lHgUFqaYyg\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Our analysts were right about Apple (AAPL) declaring its dividend and surging past $600\/share. But how do they feel about the future of Apple? All I can say is&#8230; Our analysts are the real deal. Last year, Investment U Associate Investment Director Marc Lichtenfeld and Senior Analyst Steve McDonald made bold predictions about the world\u2019s &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2012\/03\/28\/whats-next-for-apple-nasdaq-aapl\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;What\u2019s Next for Apple (Nasdaq: AAPL)?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28643","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28643"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28643\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}