Topeka Capital Markets analyst Brian White explained that the company’s current stock price does not reflect its rapid growth in the last years, nor its future growth prospects.
The analyst is firing up coverage of Apple at his new employer, New York-based Topeka Capital Markets. He previously worked for Ticonderoga Securities, which folded in January.
White has a reputation for congenital bullishness — not to mention numerology — when it comes to Apple. Last summer, he put a $666 target on the stock. Shares of Apple closed Monday at $618.63, up more than $19, or 3.18%.
This time the analyst got this price basing on his estimate for Apple’s calendar-year 2013 earnings, multiplied by 17. He noted that the company’s shares carried a multiple in the mid-20s from 2006 to 2010.
According to the San Francisco Chronicle, Wall Street analysts called the company undervalued for much of last year, but the stock has risen to match some earlier estimates. It’s up 79 percent over the past 12 months.
Apple is currently the most valuable public company in the world which has a market capitalization of $574 billion. A price of $1,001 per share implies a company value of $935 billion, much above what any company has ever been worth.
The 52 percent rise in the stock price this year was caused by high sales of iPhones and iPads in the holiday quarter, plus the announcement that the company will start paying a dividend this summer and buy back shares. That’s a way to reward shareholders by tapping Apple’s $97.6 billion cash hoard.
“Apple fever is spreading like a wildfire around the world. We see no end in sight to this trend, especially given the company’s low market share in the mobile phone and computing markets,” Mr White explained.
However, many investors consider Apple to be overpriced. Its current price-to-earnings ratio — a measure which shows how much a dollar’s worth of the stock generates in profit — is 17.5. That’s actually below the average P/E for all stocks traded on the Nasdaq at 21.1.
On the other hand, White may be running too far ahead of the pack. As ABC News writes, the average “price target” estimated by 46 analysts who follow the company is $700. In Wall Street terms, price targets are simply the analysts’ guesses on where they think the stock will go.
Tech analyst Rob Enderle suggested that Apple might see a few bumps in the road without its visionary founder Steve Jobs now that Tim Cook, the former operations chief, is in the CEO seat.
“Now recall that Apple was in decline until Steve Jobs took over — and for a while after — and the new Apple was modeled after Sony, which currently is a bit of a train wreck,” Enderle writes.
“It’s undisputed that Steve Jobs was CEO of the century, which means he was the best there was in his time. It’s known that he was a micromanager. I would argue the majority of those who followed Apple thought Steve was irreplaceable there,” he added.