Apple Business Roundup: Is Apple’s Stock Fairly Valued?

AAPL (NASDAQ:AAPL)  Down With The Rest 
Markets are deep in the negative today over concerns about the European crisis based on comments by German officials that the government was against combining the current and permanent bailout funds (a plan that was expected to go through.) Shares of AAPL are moving with tech in the red. Catalysts include iPhone upgrade cycles and adoption; update to the iPad in early 2012; continued market share growth of the Mac business line; penetration in China and emerging markets; the evolution and potential re-conception of Apple TV; and platforms such as Siri, mobile advertising (iAd), books and publishing, gaming, mapping and social (Ping). Shares of Apple trade at 8.6x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).

Another Analyst Raises iPhone Estimates, Cuts iPad Estimates (Barron’s)
Canaccord Genuity analyst Mike Walkley reiterated his Buy rating on Apple shares after raising his estimates for the iPhone this quarter from 29 million units to 30.5 million units. That said, Walkley also cut his estimate for the iPad to 13 million units from 14 million, attributable to the expectation that inventory is being drained ahead of the introduction of the next iPad and also heightened competition from Amazon’s Kindle Fire.

Retail Segment Sales To Re-Accelerate In Coming Quarters (Barron’s)
Barclays Capital analyst Ben Reitzes believes that while last quarter’s retail revenue rose only 1% year-over-year, retail revenue growth will “re-accelerate” in “upcoming quarters” thanks to both new store introductions and the unveiling this quarter of the iPhone 4S. He writes that in FY12 “retail segment sales will grow 20% vs. 44% in FY11, helped by new international stores in prime locations.” Reitzes maintains an Overweight rating on shares of Apple and a $555 price-target.

Apple Could Have Had A Record Month Of November (AppleInsider)
Brian White of Ticonderoga Securities says that the latest data from his “Apple Barometer” shows supply chain sales up 17% month-over-month, a number well above the average 2% growth seen over the last six years. White believes that the numbers show Apple on track to post the company’s best November in history. Additionally, he believes that reduced shipments in the month of October, particularly for the iPad 2, are due to the fact that Apple ordered an abundance of units in the preceding quarter.

There’s No Compelling Reason Why Apple Should Make A TV (ZDNet)
Some fighting words! There’s no compelling reason why Apple should go into the business of making TVs. What’s more, not a single person writing about all these rumors can come up with a good reason either. They pull together technologies like Siri and ARM-based CPUs, then do some hand-waving and come to the conclusion that Apple must be working on TVs. Ignoring the fact that Apple already sells a product that will connect to any TV that happens to have an HDMI connector. It’s called the AppleTV.

When It Comes To TVs, Everyone’s Wrong About Apple (Wired)
Conventional wisdom, or Gene Munster’s view of the upcoming Apple TV, is wrong for a handful of reasons:

  • It’s the wrong price for the market
  • It doesn’t match Apple’s strategic trajectory
  • It’s the ecosystem, stupid
  • A cool interface will not save you
  • You have to deliver compelling content

Apple may have the technology to bring the vision to fruition. But remember what Steve Jobs said, “It’s not a problem of technology. it’s not a problem of vision.” It’s a problem with the market.

Apple Hiring To Release Siri Into The Wild (AppleInsider)
Apple is hiring more Siri engineers to work on evolving API, features and languages. The company has at least two job postings open for “iOS Software Engineers” that describe work on the Siri voice assistant user interface and the development of an API as well as additional job listings that involve porting Siri to other languages. By having Siri in the wild responding to actual voice requests from real users, Apple is collecting a treasure trove of information it can use to make Siri even better. Watch out Google.

The Truth Is, Apple’s Stock Is Fairly Valued (Business Insider)
Henry Blodget asks, what’s the truth about Apple stock at $400 a share? Is it absurdly cheap at a 10X forward P/E multiple? Or is Apple’s stock overvalued with the best days behind it? The answer is: Apple stock seems to be fairly valued. In other words, the stock seems to be reasonably priced. It’s at a level that takes into account both the potential upside and the potential downside. It appears to have about 50% downside and 50% upside, depending on what you think the company’s growth rate will be over the next couple of years.

Heather Leonard is the Apple analyst at Business Insider.