I love the 70% growth story. Because like so many companies getting hurt during our economic downturn, it is like a lost year for them. So now they get to report 70% growth. year over year, but why not take that out over 2 years. Nobody really thinks apple will grow 70% next year. So why do so many talk about growth like that. Apple will grow of course. It sells computers and smart phones. Smart phones is the only growing sector in phones, so it should grow. tablet computers is also a new sector and so it has to have growth.
Mac sales have increasing from 5% to 20% of market share. And the good thing is that it is the younger demographic that is signing up. That is the true growth story. Because once you pick a platform you usually stick with it for life. But a phone lasts 3 years and you can switch.
I believe (and many others do too) if you project into the next full year, Apple will grow 50%-60% in earnings and revenue growth. How do I come up with this "realistic expectation"? A few ways to verify and see this for yourself.
First of all the analysts have been dead WRONG for 7 years under predicting Apple's growth rates. Most think Apple will earn 18 Billion next year from about 14 Billion this year...that's almost 30% growth. Apple has far outpaced what the analysts believe quarter after quarter year after year...a year ago most analysts thought Apple would earn maybe $11 per share and here we are over $15...40% more than the "experts" thought.
Ok, here's the raw data on growth for FISCAL YEAR:
2010 40 million phones growing to 60 million phones (50% growth) 2010 7.5 million iPad growing to 30 million iPads (400% growth) 2010 15 million computer growing to 20 million computers (33% growth) 2010 40 million iPods will stay about the same...(no growth)\ 2010 30% growth in iTunes,iAd,Apple TV, misc. on average.
The iPhone and iPad will make up 60% of Apple's revenues and earnings. The mac will make up 25% of Apple's revenues and earnings and the rest will come from iPods and iTunes and iAd and Apple TV and mis software, peripherals, etc..
It seems obvious to me that the smart phones will grow a solid 50% or more for next fiscal year...the 30 million iPad units seems EASY...combined we could see over 100 million iPads and iPhones next year...and with that possibly a 100 Billion dollar revenue year...ok, this is a little bit optimistic granted...but it's possible...and if all that take 2 years instead of 1...well that's nearly 100% growth...gotta believe the stock will react to that in a big way.
You've really got to realize that Apple has and will continue to grow for the next 3-5 years FAR FAR FAR faster than most analysts predict..there track record proves this...and the lack of marketshare (HUGE ROOM FOR GROWTH) proves apple can do this.
Did you know that Apple only has 5% of the world wide computer market? Have you heard of the Halo effect from it's iPod, iPhone and now iPad? Do you realize that even with Apples huge success in smart phones that Apple only has a few percent of the overall cell phone market...and maybe 1% of the future tablet market!
HUGE room for growth here...I've seen it for 7 years..if I'm wrong over the next 2-3 it will be a first time for Apple...long term buyer..long term holder...so far I'm up over 600% on my Apple stock.
Although Apple only grew 35% the year before, you should remember that we were in the worst recession since the great depression. In fact where most business' contracted and lost money and revenue Apple grew at a faster rate than even Google does today during better times! And Google trades at a 25PE ratio which is 20% above Apple's 20PE ratio.
So RELATIVE to it's peers and the entire marketplace, Apple is growing at 4-6 times faster than the average company....if the average company sells at a PE ratio of 14, you'd think Apple would sell at a PE ratio at least double or triple that.
I think a PE of 30 is fair for Apple...certainly 25 is realistic in the short term (1 year). As PE ratios expand and we come out of this recession the cream will rise to the top and Apple's PE ratio will FAIRLY reflect it's continued profit/revenue growth. It's possible with the mass quantity of iPads Apple is beginning to make, that their unit sales will get even more efficient...and profit margins will rise a little bit. 40% is not too much to hope for, but certainly I see Apple easily maintaining a 36-38% margin conservatively.