Apple just announced FY2012 Q2 earnings;and the growth saga continues.
Have you ever found a company that has best of both worlds? — Apple’s earnings per share is growing at astounding 94% with P/E ratio of 9.
Apple’s stock is more attractive than IBM, McDonald’s or Microsoft on the Price to Earnings valuation.
Apple was trading at $459.68 on February 4th, 2012 when I published my model portfolio. Today — after the closing — it is trading at $601.
A week ago, I visited nearby Apple store as I love to do so. I noticed a 5 or 6 years old girl playfully using new iPad3. I realized that Apple has transcended new generation of digital technology for the new generation — no more cumbersome menus to nevigate; no need to know where the old program resides.
iPad has allowed users — who are not geeks — to connect directly with the digital world to explore and discover those apps that can do just about anything you want to do — connect with friends, share your pictures, buy and sell stocks, check your emails.
- $39 billion revenue. All time records.
- EPS(Earnings Per Share): $12.30 vs $10.04 expected.
- Mac products: now records for desktop and portables. 4 million Macs sold.
- iPad: more than 11 million iPads sold. Increase of 151%; iPhone: more than 35 million iPhone sold. Increase of 88%.
- Gross margin rose 600 basis points to 47.4%.
- International sales made up 64% of total revenue.
- Customers love the new iPad (AKA demand is growing rapidly).
- stores: 12.2 million revenue per store – up 23%.
- iCloud: 125 million customers signed up (AKA expect more sell via iCloud).
- Cash on hand: $110.2 billion; No debt.
- Dividend: $2.55 per share.
- Revenue $7.9 billion in China; Mac sales up 60% year-over-year. That’s the iPhone halo effect in action.
Why I think Apple is the Stock of the Decade:
1. Apple is cheaper — trading at a forward P/E of 9 — compare to other value stocks that Warren Buffett has in his portfolio, mainly, McDonald’s, IBM and Microsoft.
2. Apple per square foot sales in its store is five times any major retailer in the world.
3. Apple has announced dividend payout of $2.55 per share recently; it’s attractive to all of those retirees and major funds heavily invested in the dividend paying stocks.
4. Apple’s cash hoard has grown to $110 Billion. It’s more than all but only top 20 companies in S & P 500.
5. Apple just started selling internationally. It’s sales in China in the current quarter was $7.9 Billion and growing.
6. iPhone 5 and Apple TV are two major products expected this year.
7. Apple has revolutionized commodity business as such that it has incredible pricing power over its competitors. Apple has executed flawlessly so far and it commands tremendous competitive advantage over its competitors.
8. There is no other company in the S & P 500 with 3 years sales growth of 52%, EPS growth of 68% and $110 Billion in the bank.
9. Coca Cola is known as the household name worldwide. Apple has all the potential to become the household name worldwide.
10. There is no other stock that can excite both value and growth investors with its incredibly low valuation after a great run while growing at a torrid pace from every financial measure.
Recent pullback in the stock price proves that most pundits don’t know anymore than us — mere mortals — when it comes to predicting future of any stock. I believe that Apple has incredibly astute management at the helm. Nothing is forever in this world, but I think that Apple has just begun its growth in the international market. In fact, sales was better in Europe than the sales in America. With the economic woes Europe is facing, Apple’s strong sales show the power of a giant brand.
I don’t average down. As a growth investor, I buy stock while it’s ascending. Apple has been one exception. I will keep buying it on the dip, as long as it can deliver this phenomenal growth.
Do you agree? I’d love to know your opinion.
Disclaimer: I do own Apple stock. I am not a certified financial adviser. Please do not construe my advice to make financial decision unless it fits your investment style.
(Photo courtesy: JStrickland)