Sorry!! The article you are trying to read is not available now.
HOT TAGS:  

Is Apple Inc. Heading to $888?

Print comment Post Comments
TECH GURU SEAN UDALL BREAKS DOWN APPLE
DailyFeed
Editor's Note: This piece was sent out as an alert to TechStrat subscribers on Friday, September 27.

Today, I am rolling out my new Apple (NASDAQ:AAPL) price target. As you all will remember, I never joined the aggressive upside calls seen in 2012. In fact, I was in the opposite camp, selling down the position and moving those funds into Google (NASDAQ:GOOG) before that stock nearly doubled from the $550 area to the $900s.

During that time, AAPL went from $705 to $385, though I started incrementally increasing my AAPL bullishness in the low-$500s. I also largely favored my bandwidth and fiber plays and emphasized those positions over AAPL until the early part and middle of 2013.

So, where are we now?

I'm now back to positioning AAPL as my favorite large-cap tech name. And frankly, it's one of my favored names across all market cap ranges for future upside on a risk-to-reward basis.

So how much upside do I expect?

I'll break this down into an easy to understand table, but first and foremost, I am putting my new long-term target range at $800-875.

It's easy to call this range nuts, but if you dig into the details, it's actually quite reasonable. $800 is stunningly easy.

See the table below:



As you can see, I am not using aggressive valuation assumptions or fluff here. Using just the average street estimate plus cash gets me to $698. Using my own EPS number and concurrent cash at that EPS level, I get to $805, and if I add in some modest upside for what I think will be a superb iPhone 6 (big screen) launch, an iWatch, and initial revenues from the new digital/online initiatives I've highlighted, I get to $888. For simplicity's sake, I am shaving the range to $800-875.

Moreover, I view this target range as potentially conservative. After all, it wasn't that long ago that the analyst cabal was at or above my current $50 EPS estimate. If the iPhone 6 and iWatch are as strong as I think they could be, my "upside" estimate is also likely pretty low.

Lastly, I have ZERO in here for a TV product, which many others think is a near-certainty at some point in the next year.

Other things that would drive upside would be my long-held view that AAPL should adopt a more aggressive M&A posture, which could help it hit a home run in ramping up a new digital payment stream.

Again, I have ZERO in the model for these "potentials" even as I'd assign at least 35-50% odds that some of the above will occur.

Bottom Line: There is actually a lot of room for me to move this $800-875 target range to the low $1000s. Thus, my belief and portfolio position is that AAPL doesn't just move into the consensus $540's targets but much higher.

Just like so many times before (think AAPL fervor 2012, Facebook (NASDAQ:FB) this year, Baidu (NASDAQ:BIDU) just 3 months ago, I believe the analysts are trapped in a herd mentality, and we will see a string of higher estimates and targets over the next few quarters.

P.S. This Wednesday at 4:30 p.m. ET, Minyanville is hosting a special FREE tech-focused webcast, where he'll discuss his top stock picks for year-end, potential takeover targets, and the IPOs you need to be watching. (Hint: It's not just Twitter).

Click here to register for the webcast.
POSITION:  Position in AAPL,GOOG,FB,BIDU

TICKERS