Apple is Hot, Hot, Hot!

October 22, 2007 at 2:18 pm  ·  Category: Stocks

What you have to understand about Apple (AAPL) is that they don’t sell iPods, Macs and iPhones: they sell Apple products. 

And Apple is hot!!!!!

What do I mean?

Apple became relevant again with the introduction of the iPod. 

But what they did was manage to transfer their success with the iPod into success with Mac computers – which is now the driving force of their growth

And, though it’s early, it looks like they are going to be able to continue by selling boatloads of iPhones (Apple FY 4Q Earnings Release).

Because the truth is that iPod revenues are essentially flat and have been for the last 3 quarters.

But the “hotness” of the iPhone rubbed off on Mac computers whose sales are taking off.  They sold more than 2 million Macs in the just completed quarter for more than $3 billion in revenue

Mac sales represented 50% of revenue in the current quarter.

And, believe me, Steve Jobs knows what’s going on and he knew he needed a new hot product to keep growth going as the iPod matures.  Which is why Apple started developing the iPhone which they put out at the end of June.

And, though, like I said above, it’s still early, this first full quarter of iPhone sales, in which they sold 1.1 million of them, is a promising start. 

I’m a little confused how they only made $118 million in revenue which works out to about $105 per unit, when the retail price was originally $600 before they lowered it to $400 last month, but I think you have to give them the benefit of the doubt for now.

This company is a juggernaut.

Apple is blowing up in the after hours, up $10, almost 6%, to around $184.  $200 can’t be far off. 

In fact, $200 strikes me as about fair value on Apple which would give it about a 34 forward multiple on earnings next year when you back out their $15 billion in cash (though I personally don’t want to own them in the current economic environment since they sell discretionary items).

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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