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A Carl Icahn Favorite with Bright Prospects

December 13, 2013 | About:
When it comes to tech giants, Apple Inc. (AAPL) is one of the names that instantly comes to mind. The firm’s sustained success, which is indicative of a continued growth trajectory, is expected to persist over coming years. It has seen a solid third quarter in 2013, and recent financial result continue exceeding expectations. As the path towards success is clear, shareholders have great hopes for the upcoming year. A possible partnership with China Mobile Ltd. (CHL), the world’s largest wireless carrier, is particularly exciting, as it would lead to further expansion for Apple sales outside the U.S.

Solid Sales Due to Rising Demand for Innovative Products [/b]iPhone sales have been doing exceedingly well over the past year. Apple’s total revenue this year has already breached the $170 billion mark, compared to 2012’s $156.5 billion. Teaming up with China Mobile should lead to a further boost in sales, making an investment at this point attractive, especially due to the stock’s current valuation. Apple is currently trading at 14.1 times its trailing earnings, meaning shares are available at a 6% price discount relative to the industry average.

[b]Strong Sales, Loyal Customer Base
[/b]December has already seen solid iPhone 5s sales, along with increments in the sale of a wide variety of products ranging from iPads to MacBooks. QoQ is currently at 7.0% and OM at 26.8%, which are good indicators of Apple’s strong position. Analysts estimate that the overall target for iPhone sales during the month of December can even be raised from $51 million to $53 million, considering that demand is still strong for the 5s.

It is true that Apple has grown mainly due to its revolutionary invention, which allowed for the integration of hardware and software: the iPhone. It has since developed a somewhat strong and loyal user market, which guarantees stable levels of demand for new products. Each iOS user becomes, we could say, enchanted by the device, and is more likely to purchase another Apple product in the future. This ensures shareholders can expect stable long-term Apple sales on existing products, as well as for any upcoming product.

[b]Rivalry with Samsung
[/b]Apple is definitely an industry leader when it comes to hardware and software integration, yet it is seeing increasingly tough competition from other providers, particularly on the tablet front. [b]Samsung Electronics Co. Ltd. (SSNLF)’s trailing sales for example are at $214 million for 2013, whilst Apple’s are around $170 million. With Samsung launching a wide range of products that compete with Apple’s at very competitive prices, some fear sales might decline.

Despite the competition, Apple shouldn’t feel too threatened. The iPhone’s success is still undeniable and it is not likely to come to an end anytime soon. It has recently been attracting new customers worldwide, particularly in emerging countries. Also, the possible partnership with China Mobile is bound to add to Apple’s continued success in the not-so-distant future.

An Icahn Favorite

Taking all this into account my hopes are set high with Apple, as are Carl Icahn’s, which recently bought into the firm with a huge position, amounting to almost 4 million shares. Recent results encourage a bullish feeling, given that I estimate product sales will grow even further (particularly when it comes to the iPhone and iPad). Experts even predict that the smartphone market will basically see its sales figures doubled within the next two years. Furthermore, if Apple releases a new smartphone that does not account for the “premium pricing” the company is well known for, it could increase its position internationally, while boosting sales even higher. For all the above reasons, I feel very bullish regarding this stock’s future.

About the author:

Vanina Egea
A fundamental analyst at Lone Tree Analytics

Visit Vanina Egea's Website


Rating: 3.8/5 (6 votes)

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