Andy Zaky Comments (383)
By the way, I've put in countless hours drafting my 2012 earnings estimates. A lot goes into making predictions more than year out. Everyone should know the following:
If Apple doesn't come out with any new products or services beyond what it normally releases, here's what I've arrived at:
FYE 2011 Revenue: $111.77 Billion
FYE 2011 EPS: $28.69
P/E Ratio at $340.00 (Friday's Close): 11.58 [October 2011]
Price Target Based on Today's P/E Ratio: $465.35 (16.22 P/E)
Price Target Based on 20.0 P/E Ratio: $573.80
Price Target Based on 17.5 P/E Ratio: $502.08
Price Target Based on 15.0 P/E Ratio: $430.35
FYE 2012 revenue: $149.46 Billion
FYE 2012 EPS: $39.15
P/E Ratio at $340.00 (Friday's Close): 8.68 [October 2012]
Price Target Based on Today's P/E Ratio: $635.01
Price Target Based on 17.5 P/E Ratio: $685.13
Price Target Based on 15.0 P/E Ratio: $587.25
Price Target Based on 10.0 P/E Ratio: $391.50
Price Target Based on 7.5 P/E Ratio: $293.63
So what does this say? It says that as long as you believe in the earnings power of Apple, it would have to trade at a 7.5 P/E ratio in October 2012 for the stock to lose 10% of its value from where it is today.
If the stock is trading exactly where it is trading at today in terms of P/E Ratio (16.22), here's what you can expect over the coming year:
July Earnings (Q3 2011): TTM EPS $24.56
16.22 P/E Ratio = $398.36
17.50 P/E Ratio = $429.80
20.00 P/E Ratio = $491.20
October Earnings (Q4 2011): TTM EPS $28.69
16.22 P/E Ratio = $465.35
17.50 P/E Ratio = $502.08
20.00 P/E Ratio = $573.80
January Earnings (Q1 2012): TTM EPS $31.82
16.22 P/E Ratio = $516.12
17.50 P/E Ratio = $556.85
20.00 P/E Ratio = $636.40
12.50 P/E Ratio = $397.75
10.00 P/E Ratio = $318.20
So there you have it. I hope this answer the question that people always ask me: What will Apple be at in July, what will Apple be at in October and what will Apple be at in January. I'm sure people ask that question because they're holding leaps or whatever.
Let me say this. The stock market is crazy. Do I think they will give it a 5 P/E ratio? Probably not. Would it shock me if they did, not even close. Remember they gave the stock a sub-10 P/E ratio during the lows of the financial crisis. The stock traded at the lowest cash to value of any other large cap stock that was actually earning money. The company had almost $30 in cash per share and traded as low as $75.00 in after-hours on the day Steve Job announced his leave from the company.
What this says is this. People who buy shares, rather than leaps and options, are far better off. Why? Because we all know that Apple is going to see $500 sooner or later. It's going to happen one way or another. There's no argument on this end.
The problem is however and has always been "when." These can keep the stock trading at some god awful P/E ratio for an extended period of time.
So that's what you have to be careful about if you're holding leaps. I'll get more into this over the next few months. Just keep in touch.
The problem as I see it is that as Apple gets cheaper the bar is being raised by wall street just to get a reasonable valuation. Apple is being judged by a different standard than any stock in the world. Sad but true.Apple will need to buy back stock or this will get even more rediculous.Shorts are betting they won't. Not a bad bet ..for now.