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Do Not Bet Against This Company
No matter what the economic conditions, Apple Inc. (AAPL) is the one company that can thrive through
thick and thin. The last year or two of remarkable performance is a clear indication of Apple’s staying power.How can you not want to own this company?
Perhaps you were one of the sellers gripped by fear of the loss of shining star, Steve Jobs? If so you just missed more than $50 of stock appreciation.
Perhaps you are one those now selling because the stock has gone too far too fast?
If so, get over it. Apple, even with the impressive run-up, trades for a modest 25 times trailing earnings and 23 times forward earnings. In a normative
market state, AAPL would garner a frothy 50 multiple to be considered at a peak valuation. Put a 50 multiple on the current estimate for September
year-end 2009 earnings, and you get a stock price of $276.Do not bet against this company. There will never be another one like it. The stock is absolutely, definitively and unequivocally a must-own stock.
Here are five reasons why.
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Reason #1 to Own Apple – iPhone Explosion
If they filmed “The Graduate” today, the line would be, “it’s all about smart phones,” instead of plastics. It is, indeed, all about smart phones,
and the best of the lot is the Apple iPhone.According to a recent ChangeWave
Alliance survey, 44% of the people planning to buy a smart phone in the next 90 days will make it an iPhone.The hotness of the product is well deserved, as the features on the phone are unmatched. Research In Motion’s (RIMM)
Blackberry and Palm’s (PALM) Pre come close, but they will always be second fiddle to Apple.What I love most about the iPhone is that the product will be a cash cow for years to come. Fee-based revenue is always better than a hardware sale,
and that is what you get with iPhone. This includes the huge explosion on the application side, where a mini-development boom is taking place.
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Reason #2 to Own Apple – The MacBook Pro
After several months of sliding Mac sales, the Mac product line is enjoying a healthy resurgence.
The reason for the boost? Sales of the new MacBook Pro 13.
Apple cut the price of the notebook computer to a manageable $1,199, and the market is responding big time. There is a 7-10 day delay in getting
the new notebooks online, and brick-and-mortar stores are seeing similar demand. Apple hasn’t seen this kind of demand for its Macs in over two years.When earnings come out July 21, I expect the numbers to reflect this increasing demand.
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Reason #3 to Own Apple – China
For months, there has been speculation that Apple is cutting a deal with one of the two major Chinese wireless carriers, China Mobile (CHL)
or China Unicom (CHU).At this point in time, it looks like China Unicom will be the winner of the deal, and that means Apple will be the winner long-term. China Unicom
offers Apple control over both the hardware and software of the iPhones sold in China, plus the ability to reach more cities than China Mobile.Although this won’t affect the number of iPhones sold in 2009, expect this deal to be a big boon to Apple long term.
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Reason #4 to Own Apple – iTunes
The recent passing of pop music king Michael Jackson is just the latest boon for iTunes. Downloads are exploding, creating an unexpected surge in
revenue for Apple.Why would you not want to own a piece of that action? iTunes is the gift that keeps on giving.
The music industry may not be in the greatest shape, but Apple is in the prime position to make money even in a down economy.
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Reason #5 to Own Apple – Video Games
One of the most intriguing aspects of the smart phone is the application side of the business. Some of the most popular applications have been games.
The quality of these games has been amazing, even to play on such a small device.Do you see where I am going with this?
The development of games for the iPhone creates a huge opportunity for if and when Apple goes after the video game space. Having its own console
and the development power for software is a natural extension of Apple’s current business. Such an extension has yet to be factored into Apple’s future
revenue and profit model.Investors in Apple can look forward to a bright future of innovation and milking of multiple cash cows. I fully expect video games to be the next
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