by Jeff Reeves | March 7, 2012 1:42 pm
Apple (NASDAQ:AAPL) was the center of attention Wednesday — isn’t it always? — at a press event in San Francisco. Consumer electronics fans were eagerly awaiting iPad 3 release news, especially the date that the new Apple tablet would first be available for sale.
They weren’t disappointed.
The next incarnation of the Apple iPad will include a host of features. There’s the slick “Retina” display, designed so it is literally impossible for the human eye to discern individual pixels at arm’s length. “The new iPad” boasts an improved 5 megapixel camera and the capability to record HD video. There’s also a voice dictation feature on this new Apple iPad tablet.
Oh and by the way, at the iPad event, Apple also unveiled a new Apple TV …
I’ll leave the gadget reviews to the tech blogs and the long wait in lines to Apple disciples who just can’t to trade up from their iPad 2 … or – gasp! — a lowly first run of the iPad tablet from almost two whole years ago!
What investors should be salivating over this week isn’t a chance to own the newest Apple gadget, but the prospect of owning AAPL stock. There were plenty of reasons to buy in before today’s press conference, and Apple is looking better than ever right now.
Here are five reasons Apple is better than ever:
Fairly Valued: The biggest criticism of Apple as an investment is that AAPL stock just never seems to quit. Up 50% in the past 12 months and up 500% in the last five years, it has to cool off eventually … right? Well, maybe not. The important thing is that profits are rising just as fast as the stock. Based on predictions of $49 per share for fiscal 2013 earnings, Apple has a P/E ratio of under 11. The historic average for the S&P is 15, and right now the trailing 12-month operating P/E of the S&P 500 stands at 13.9 — so Apple is actually a bargain compared to many other stocks, at least by this price-to-earnings metric.
Stunning Cash Hoard: Last quarter, Apple reported $30 billion in cold, hard cash on its books. It has another $67 billion in long-term investments. Total hard assets at the company are about $138 billion. So that’s what this company is valued at without a single iPad sales receipt! It makes it easier to understand how this company can be worth so much, and sit on the top of the heap as the largest publicly traded U.S. stock by market cap.
No Sales Fatigue Yet: Sales growth is amazing for this stock. Apple sales revenue has tripled from fiscal 2008 to fiscal 2011, from $32.5 billion to $108.2 billion. That’s in part because the iPad juiced numbers, but also because the iPhone remains a tremendously popular item. Even with “old” products like its iPhone smartphone that have started to see competition from devices powered by Google (NASDAQ:GOOG) and its Android operating system, the iPhone is a powerhouse, selling a record 37.04 million iPhones in the fourth quarter of 2011 — a 128% increase over Q4 2010! Not only is the iPad growing fast, but the iPhone continues to see momentum in the U.S. That’s to say nothing of emerging market potential — consider that the iPhone 4S sold out preorders in a mere 10 minutes when it became available in Hong Kong last November.
The “Smart Money” Still Is Buying: So is it just suckers like me buying Apple? Not quite. Consider that this week Barclays Capital just bumped its 12-month price target on Apple stock up 13% — from $630 to $710 per share! Even if you don’t want to believe in the new target, $630 still is a nearly 20% gain from here. Not bad. This is after a February upgrade to the stock from Oppenheimer, which put an “outperform” rating on AAPL shares. Clearly, institutional investors aren’t scared at all of owning Apple even after the impressive run of the past few years.
The Future: “The new iPad” may not blow away some folks, since it isn’t a complete reinvention or a brand-new gadget. The new Apple iPad does have a host of new features though, and is testament to the company’s ability to recreate its successes. The incremental improvements in each model also provide a bump to sales, since gadget junkies continually run out for the next great model. Apple may not need to reinvent the success of the iPad or iPhone to maintain its dominance. All it has to do is keep incrementally improving. But don’t think Apple is resting on it’s laurels — there’s a reason the tech company started Wednesday’s event with a fancy new Apple TV. It just goes to show that even while the masses clamor for iPad 3 and iPhone 5 news, Apple will never quit seeking the next big thing.
Apple is also one of my 5 “editor’s picks” for March, if you want more detail and more stock picks.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.
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