Newspaper article Sarasota Herald Tribune

A Look at Apple's Prospects for Growth through 2015

Newspaper article Sarasota Herald Tribune

A Look at Apple's Prospects for Growth through 2015

Article excerpt

One year ago, when I wrote about Apple (ticker: AAPL), it was selling at about $64 a share (all data is adjusted for its recent seven-for-one split).

I shared my view, based on then current data, of what its price might be by the end of September 2015 (Apple's fiscal year).

"The model forecasts that the chances are about two out of three that the price will be at least $80, and one out of two the price will be at least $89." Apple last week was about $91.

The question is: With its shares up about 42 percent since that column, is there still room for a further significant price increase or could it simply stagnate?

As opposed to last year, most published analysts are now bullish on the stock. Aside from Apple's intrinsic strength, some see additional support for the stock from a possible inclusion in the Dow Jones Industrials.

Let's review recent data and then see what my model says about its price by the end of fiscal year 2015.

Apple is a sound company, rated "A" for growth and profitability by Morningstar.

Its consensus earnings forecast is $6.31 a share for fiscal year 2014 and $6.87 for fiscal year 2015. Forecasts for 2015 vary from $5.88 to $7.66

Its published long-term earnings-growth-rate forecasts vary from about 8 percent to 16 percent.

Its price-to-earnings, ratio based on 2014 forecast earnings and a recent $91 price, is about 14.4.

Its current dividend yield is $1.88 (about 2 percent).

Apple has recently been about 75 percent more volatile than the S&P 500.

Based on data like this, my statistically based model draws the following conclusions: The chances are about two out of three that the price will be at least $93 and one out of two that the price will be at least $98.

The statistical model deals with the large variation in earnings estimates and provides quantitative data.

But perhaps its most useful conclusion is that Apple's stock, at least in the shorter-term, is much closer to fully valued than it was last year.

When analysts' earnings estimates for 2015 vary by more than 30 percent, the model's results benefit from additional explanation. For example, when the model forecasts that the chances are 2 to 3 that AAPL will be at least $93, it doesn't mean it won't be $103 -- only that that price is less likely, given current consensus data. …

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