One Tech Giant to Buy Before Next Quarter
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) announced September quarterly results that showed the company pulled in $36 billion in revenue and quarterly net profit of $8.2 billion. Comparatively, the company pulled in $28.3 billion in revenue and a net profit of $6.6 billion in the fourth quarter of last year. 10% of the revenue came from international sales, while the tech giant generated $41 billion in net income and over $50 billion in operating cash flow in fiscal 2012.
Sales of its products also rose. Apple sold 14 million iPads in the quarter ending September, representing 26% growth over last year. It also sold 26.9 million iPhones in the quarter, representing 58% growth over last year. Apple sold 4.9 million Macs and 5.3 million units of iPod, the only Apple device to see a decline in sales over last year.
I believe Apple's stock price could increase in the next few months. The company has had trouble keeping up with demand for some of its best selling products, especially iPhone 5, which debuted at the tail end of the quarter. To blunt advance by rivals while preserving its premium pricing policy, Apple recently unveiled a smaller iPad and yet another version of the big tablet. The Mini iPad is a cousin to the original iPad, whose screen is about one-third larger.
Despite its success, Apple has its own design problems as well as problems with competitors. Amazon's (AMZN) Kindle Fire HD and Google's (NASDAQ: GOOG) Nexus 7, similar in size and specs, hope to get a share of the market for the mini iPad. Some analysts thought Apple's mini tablet would be cheaper than the competitors', but Apple priced it dear to pressure rivals later for price reduction.
Apple's other products are threatened with competition as well. Microsoft (NASDAQ: MSFT) is challenging Apple's stature as the leader of the sizzling mobile sector for tablets by releasing Surface. In its attempt to catch up with Apple, Microsoft also officially released an overhaul for the nascent Window phone software. The new software, dubbed Windows Phone 8, will have the ability for apps to display pasted photos or the latest daily deal on the device's own screen.
Apart from this, Microsoft has introduced the biggest overhaul of its flagship Windows software in two decades, reflecting the rising state of its competition with Apple and Google for the loyalty of customers who are flocking to mobile devices. The new Windows is packed with touch-screen capabilities, designed to vault Microsoft into the tablets market dominated by Apple's iPad. Though its lack of a broad range of games, tools, and other downloadable software could detract from the Surface in a head-to-head comparison against iPad and its more than 775,000 apps, there is no doubt the Microsoft challenge is real.
Several other competitors have crammed up product announcements to rival Apple. Nokia (NOK), Motorola Mobility (MSI), former leaders in the mobile race, have unveiled new smartphones. Sony (SNE), Samsung (SSNLF), and others have launched new tablets and phones. Reacting to the phenomenon, Michael Gartenberg, a technology analyst at Gartner, said, "It does make you wonder if Apple has thrown the industry a little bit off balance and taken away a little of their confidence."
Apple has to tackle Google in a slugfest over maps in iOS6. It removed Google's built-in apps, such as You Tube, that had been present in previous iPhones and replaced them with its own. But it clearly botched the map's functionality, and it is being heavily criticized for it. iPhone 5 is now famous for what it doesn't contain: Google's maps. There have been heated debates in the public about Apple's insistence to challenge Google and the need to improve the accuracy of the iPhone's point-of-interest (POI) data.
Apple also has to wage a war with mobile newcomer, Android - owned by Google. Apple has taken manufacturers such as Samsung, Motorola, and HTC - all on the Android platform - to court over intellectual property rights, winning when a jury ordered Samsung to pay Apple $1.05 billion for infringing its iPhone patents. Apple now wants the court to compel Samsung from selling some of its Android mobile devices in the United States.
Despite the quality of the competition, analysts and officials of Apple find the company's stock to be attractive. For example, Stifel Nicolaus on August 8 recommended that investors should buy the stock. Apple officials are happy about the company's performance. "We are very proud to end a fantastic fiscal year with record September quarter results," said Tim Cook, Apple's CEO. "We're entering the holiday season with the best iPad, iPhone, Mac, and iPod products ever, and we remain very confident in our new product pipeline." Given his optimism, it will not surprise me if Apple forecast of iPhone sales of around $52 billion is achieved. That will be the highest quarterly sales ever reported by a tech company. Apple's iPhone sales for the last quarter were just $27 million, up 58% compared to last year.
I believe Apple can best be compared to Google and Oracle. Apple has a P/E ratio of 13.63, compared to 21.16 for Google, 15.45 for Oracle, and 13.68 for the industry average. Apple has a price-to-sales ratio of 3.66, which is competitive when compared to Google's price-to-sales ratio at 4.67 and 4.08 for Oracle (NASDAQ: ORCL). And since the company forecast for the next quarter is a blockbuster, I believe the stock is a solid investment with enormous growth potential.
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