Why Apple Will Grow Further This Year
Helen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Friends, family and people I meet often ask me what my favorite stock is. Naturally, this is constantly changing, but if I had to pick my favorite this year, it would be Apple (NASDAQ: AAPL). In my opinion, this company is a rising star (and has been for quite some time), one that just continues to outperform its competitors in the IT market. The company has maintained itself as one of the financial strong performers through the year, despite weathering several personal and corporate tragedies, including the passing of its Co-Founder Steve Jobs.
The company’s continual limelight in the media, as well as important decisions, profits and products have affected its stock in a very positive way which is reflective in the rising of the stock value. As of December 2011, we have seen a rise from approximately $400 to $600 per share-- and it still seems to be climbing. It is hard to imagine that a company that had an adjusted price of about $9 per share in 2003 could now be trading at a 6,000% increase. So, if you had made a small investment of say the value of a Mac book at that time (about $2,000) your investment would now sit at about $120,000. Even those who have recently jumped on board at the beginning of the year have seen about a 30% increase, helped in part by the release of the new iPad 3 with its HD screen technology, according to David Huber of IRA.com.
However, the release of the new iPad is not the only influencing factor in the rising stock price. Apple’s decision to pay a $2.63 quarterly dividend, something rarely seen in tech stocks, has also made the stock more appealing to investors. According to Michael Liedtke in an article written for the Associated Press, these new Apple dividends demonstrate that the new Apple CEO, Tim Cook, will be pushing the company in new directions — changes which indicate more revenue and even higher stock prices for the year.
At the beginning of the quarter for 2012, Apple had achieved a record quarterly revenue, with results that even the most seasoned of Wall Street analysts did not expect. The high quarterly profit of $13.06 billion on the $46.33 is just one more reason for the quickly rising stock price.
So what is the future outlook for Apple? Well, many investors look at Apple and think “well the stock is already at about $600 per share, how much further could it go up.” In my opinion there is still more to come, especially with Tim Cook, the new CEO, looking to make his own legacy on the world’s most valuable company. The fact that he would dip into the $100 billion in company funds, to pay quarterly dividends is a change that Steve Jobs may not have made—one that may pay off quite favorably for all the Apple stock holders. According to the Associated Press this fact alone is an indication of a new era for Apple, one which is very share holder friendly. Apparently, I am not the only one touting the value of Apple. Tiernan Ray of Barron’s just released the news that Apple is now listed as one of the best consumer brands in Japan, a first time event. Good news, seeing as how it is coming up from an 11th position for the prior year.
What about the competition? Well, so far Apple is running a neck to neck race with Google (NASDAQ: GOOG), which has a market share of 46.9% through its Android platform, compared to Apple's number two position iwith 28.7% market share. Diving further, however, growth is in Apple's corner. Android market share growth slowed from nearly 20% to 1.3% on a monthly basis last year, while Apple's market share growth rate accelerated and topped Google's growth rate throughout last year. Thus it appears that new user growth favor's Apple in the smartphone market.
It’s hard to say who Apple’s other competitors are. While Hewlett-Packard (NYSE: HPQ) is another long standing IT company, it just seems to disappoint financial analysts and doesn’t seem up to par with Wall Street’s expectations, even though the company did post earnings of 1.47 billion on revenue of $30 billion, it was still a 44% decline in earning for last year.
Will Apple go further as some predict? Well, I’m not sure, but I do know the company continues to grow. In fact, the company is experiencing a 30% growth rate, according to Business Insider. Sales of the iPad continue to increase. New iTunes products like textbooks will create even further growth of the sale of this product. The iPhone 5, iTV and iPad 3 are all market hits. Apple still has a great profit margin, even if its PC competitors are priced lower. If Apple’s share price continues on its upward trend with an expected a 12 month price target of $1,001, suggested by market analysts, there may be a not so distant split on the horizon.
ThusSo, based on the above information, it appears to me that Apple has not finished growing for the year, and we can expect the stock to increase further. At any rate, even if I am wrong along with these other analysts, it is still a solid company to invest in.
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