Shares of Apple Inc (AAPL) reached a new 52-week high of $577.25 on Thursday, Dec 5, 2013. The bullish run reflects Apple’s recently announced partnership deal with China Mobile, refreshed product line-up, aggressive share buybacks and better-than-expected fourth-quarter results.
The closing price of Apple on Dec 5 was $567.90, representing a six-month return of about 29.5%. During the same period, the S&P 500 increased 10.0%
Apple delivered a positive average earnings surprise of 2.3% over the past four quarters. This Zacks Rank #3 (Hold) stock has a market cap of $508.35 billion and a long-term expected earnings growth rate of 12.1%.
Key Growth Catalysts
We believe that Apple’s partnership with China Mobile will be a major growth catalyst, going forward. The deal gives Apple access to more than 759 million mobile users in China, its second biggest market after the U.S.
Currently, China along with the U.S. contributes more than 10% of Apple’s revenues. In fiscal 2013, Greater China revenues jumped 13.0% from 2012 to $25.42 billion. The company noted that the improvement was primarily driven by higher demand for its products among the affluent middle class in China.
We believe that the deal will help Apple to gain significant market share without sacrificing its iPhone gross margin. Moreover, this partnership will boost Apple’s competitive position in China, which remains crowded from low cost smartphone offerings from Samsung, Huawei, Lenovo, ZTE and Xiaomi,
Apple’s refreshed product line-up is also expected to drive growth in the holiday season. The company recently acquired Topsy Labs, which provides Apple with a vast amount of unstructured data. Apple can use this data to understand social as well as business trends, which will help it to attract marketing clients in the long run.
The Zacks Consensus Estimate for the first quarter of fiscal 2014 has increased 2 cents to $14.02 over the past 60 days. For fiscal 2014, the earnings estimate has went up 8 cents to $43.69 per share over the same time frame.
Other Stocks to Consider
Some better-ranked stocks in the technology sector include Netflix (NFLX), Facebook (FB) and AOL Inc. (AOL). While Netflix carries a Zacks Rank #1 (Strong Buy), Facebook and AOL holds a Zacks Rank #2 (Buy).