Although Apple's (AAPL) iPhone 5S and 5C have only been available to iConsumers, Wall Street is moving on to iPhone 6, already. Wow, talk about a short shelf-life?!?
Jefferies analyst, Peter Misek upped his rating on the stock to a "Buy" from a "Hold" with a price-target of $600.
The analyst summarizes, "We spent last week in Asia meeting with Apple's suppliers who indicated a substantial shift in attitudes toward Apple. Despite still seeing risk to CQ4 and FY13 revs, we now believe better GMs will allow Apple to skate by until iPhone 6 launches with its 4.8" screen. We est ~50% of smartphone shipments have
>4" screens and that iPhone 6 will catalyze a large upgrade cycle. The stock is attractive based on the attitude change, FY15 revs >+15%, and valuation."
You can read the entire Apple Report here if you like.
Not so long ago, Misek was singing a different tune as he cut the tech giant's price target to $425 from $450 in Early September thanks to problems with the production of the iPhone 5s' fingerprint sensors and a low yield rate.
This is how the Jefferies analyst gets to $600, "We derive our $600 PT (was $425) from a 11.5x multiple on our FY15 EPS vs. CY14 S&P 500 St P/E of ~12x. Risks: 1) Margin pressure. 2) Lower demand. 3) Product cycle execution."
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A P/E of 11.5, eh; let's see… during the last five-years AAPL's average price-to-earnings ratio was 15.9 with a range of 9.32 to 23.34. It's not the P/E that makes Misek's call aggressive, it is his estimate. An 11.5 P/E and $600 stock price work out to earnings per share of $52.17, which implies 21.35% earnings growth from 2014's consensus of $42.99.
Actually, the Jefferies analyst sees fiscal year 2015 earning for Apple ranging from $45 to $60 with his estimate at $52.34, which is essentially the mid-point.
It's our opinion that Apple would comm! and a higher multiple than 11.5 if earnings grew at more than 20%. Something closer to the five-year norm would seem reasonable to iStock.
Overall: Considering the trend towards larger screen smartphone screen sized, we agree that iPhone 6 will be more popular than 4 or 5 and all their variations. If Misek's profit-per-share scenario plays out, and none of the three risks hit the stock, then Apple (AAPL) is just as likely to test its all-time high as it is to hit $600, in our opinion.
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