Two Very, Very Bullish Apple Analysts

By Daniel Sparks - October 18, 2012 | Tickers: AMZN, AAPL, GOOG, IBM, MSFT | 0 Comments

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Ever since the launch of the iPhone 5, we've seen almost nothing but negative publicity regarding Apple's (NASDAQ: AAPL) future. Bearish opinions on Apple have entered the limelight. Yet two analysts remain unmoved and extremely bullish: Andy Zaky and Brian White. Their messages are strong and their conviction is firm. Their bullish sentiment clashes harshly with Apple bears.

Andy Zaky is pounding the table: He describes these bears as a "growing group of very misguided and naive investors who fail to grasp the enormity of the market in which Apple operates." Below I will highlight some of Zaky and White's bullish reasoning:

The smartphone market
According to smartphone research firms IDC and Gartner and analysis of earnings release numbers by analysts, the iPhone continues to steadily gain market share. Zaky notes that market share gains are greatest in quarters immediately following Apple's upgrade cycles.

(chart source: Bullish Cross)

With a recent iPhone 5 upgrade, Zaky expects large gains in market shares over the next few quarters.

He goes on to explain in his angry rant on bearish analyst, Doug Kass, that there is still plenty of room for sales growth: "Understanding the size and scope of Apple’s operating market is the key to understanding how far Apple will go." White reminds us not to forget that Apple's mobile phone market share is only 6%. Where can the size and scope of this market take Apple's stock? "It's going to $2000 a share before the close of this decade," Zaky claims.

China
Apple still has not launched a phone with the largest carrier in China--China Mobile. Brian White sees this as an immense opportunity; China Mobile has 645 million customers, or twice the population of the United States. 

Apple without Steve Jobs
Many people are looking for "cracks" in Apple's product development to see when Apple loses track of the customer and stops innovating in a Steve Jobs fashion. Targeting Apple's unpolished Maps feature is a classic example of unsolicited efforts to claim that Apple is reaching the top and is becoming "corporatized." According to IDC, Apple's Maps ranks 8th in importance of iOS software features to consumers. Even more telling, a recent study noted that 9 out of 10 iPhone 5 customers noted that they are not having any problems with the feature.

The iPad Mini
White believes the iPad Mini is going to be a bigger blockbuster product than the iPad. After a trip to China, White claims that the popularity of the Samsung Galaxy Note smartphone, with a larger screen than iPhones, is mostly due to its tablet capabilities. Based on his interaction with some of the Chinese consumers, he believes the iPad Mini will be the "next big thing" over there.

Now is the time to buy
Zaky and White stress that Apple's recent correction in its stock price is a great entry point for investors. Zaky called the bottom a few days ago and publicly recommended that investors buy Apple. He's only made a recommendation five times, the last two times being June 17, 2011 when Apple traded at $320 per share, and on May 17, 2012, when Apple reached $530 a share. He claims that the $630-$650 price range is a wonderful entry point. White concurs: In an interview with Fox Business on October 9, White called this correction "a gift ahead of the holidays."

As Zaky explains, Apple remains the best value in tech--by far. Just compare its per-share growth in book value against similar measures at  Amazon.com (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOG), and IBM (NYSE: IBM):

AAPL Book Value Per Share data by YCharts

Despite mind-blowing growth over the last 5 years, Apple trades at a conservative P/E ratio in relation to its peers:

The bottom line
As an investor it is usually safer to stick to very conservative outlooks on the future, but these two bullish analysts have some good arguments that are worth hearing. What gives their table pounding even more merit is the fact that, despite Apple's recent mind blowing growth, consistently envious profit margins, and numerous strong catalysts, Apple trades at just 15 times earnings and at a forward P/E ratio of 10. The recent correction on Apple's stock gives investors an opportunity to take advantage of these strong catalysts with a conservative entry point.

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