Apple Will Soar Even Higher On Tablets, New Products In 2013
Helen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
By now, everyone should be familiar with the global giant Apple (NASDAQ: AAPL). Even though many people many not be as familiar with the history between the late Steve Jobs and former Microsoft (NASDAQ: MSFT) CEO Bill Gates, consumers are still familiar with Apple’s products. From iPhones, iPads, iPods, laptop and desktop computers, Apple revolutionized the industry. For the longest time, it seemed like Microsoft would remain at the top of the tech industry. Yet, due to its surging popularity, Apple was able to surpass Microsoft in terms of market cap in May of 2010. Since then, Apple has not looked back. As it stands today, Apple’s market cap is more than twice that of Microsoft. The reason is due to Apple’s consistent line of innovative products. Currently, Apple’s stock price is around $620 a share. Even at that high number, it does not look to be over priced. The company has earnings per share of $35.11 for a price to earnings ratio of only 17.8 which is right at the industry average of 17.4.
Apple is in a very competitive industry. With competitors like Microsoft, Google (NASDAQ: GOOG), and Hewlett-Packard (NYSE: HPQ), Apple needs to stay innovative in order to remain ahead of the competition. Microsoft, for starters has not been doing bad itself this year. With successful releases of games such as Halo and Gears of War, exclusively for Xbox 360, Microsoft is able to gain market share where some of these other competitors have not. Although Microsoft has not had the best of success with mobile phones or its search engine Bing, the company looks to become a big player in the cloud computing market. Recently, Microsoft gained its biggest client in cloud computing. The company announced that it will provide communication and collaborating software through a deal with the All India Council for Technical Education. This deal will allow access to over 7 million students and half a million teachers. With this deal, and Microsoft’s attractively low price to earnings, the stock is in good position to move up.
Google is another strong competitor in the industry with Android powered phones, the biggest competitor to Apple and the iPhone. Google just recently released its 1st quarter profits, and it was a gain of 61%. This profit lead to adjusted earnings per share of $10.08, which exceeded analyst estimates of $9.65 per share. The biggest reason for this increase is due to interest in advertising in the company’s ultra popular search engine. On top of this news, Google surprised investors with unexpected news of a 2-for-1 stock split. The split will halve the $650 per share price, but will not grant additional voting rights to investors. Although this may not be a big deal to some, it will essentially keep the company in the hands of current management.
Since trading at over $40 per share just last summer, Hewlett-Packard has lost almost half of its value and is now around $25 per share. Part of the reason of the slump was due to natural disasters, such as Japan’s massive earthquake and Thailand’s flooding, which disrupted the company’s supply chain. The company has experienced a recent gain, mainly due to its announcement of outgrowing its competitors, including Apple, in PC shipments. This is great news for the company as it rose almost 7% over the first quarter last year. However, as Hewlett-Packard got a good start to 2012, there are challenges ahead. With the growing use of cloud computing, this could ultimately hurt Hewlett-Packard as a lot of its current revenue is from selling servers. In addition to this is the tablet market. With the functionality and easy to use tablets, this could ultimately begin to replace desktops and laptops. If this happens, it will reduce a lot of Hewlett-Packard’s PC sales. Although Hewlett-Packard is currently at lower prices that what has been seen in the past, there are still hurdles the company needs to overcome. While this could be a possible turnaround story, I don’t see much more from this stalwart than we have already seen.
In my opinion, I believe Apple is the most attractive stock of the above. The company dominates the tablet market as it currently represents two out of every three tablets sold. That is pretty impressive when it was estimated that 60 million tablets were sold in 2011, about 40 million of them were iPads. Market researcher Gartner believes that this number will nearly double to 118.9 million units. If the ratio above remains, Apple will sell a number just shy of 80 million iPads. Some researchers believe that the Android tablets will eventually surpass the iPad. Still, with the iPhone and iPad combined making more than 72% of Apples $46.3 billion in sales from last quarter, it will be hard for any company to catch up, let alone pass Apple. In addition to the company’s dominant market share, Apple did something that surprised investors, although it has been asked about for some time. The company finally announced its intent to pay dividends to investors. Pending board approval, Apple will pay $2.65 annually. This has been long awaited as the company holds a large amount of cash. Although the announcement of initiating a dividend can sometimes mean a company expects growth to slow, I do not see that being the case for Apple. The company’s products are far too popular around the world and all the company seemingly has to do is upgrade its current product to generate new interest. With the company’s current numbers and dividend to be initiated later this year, I see it as a good stock to own.
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