Apple Business Roundup: Undervalued Shares, Best Buy’s Curse
AAPL (NASDAQ:AAPL) Off As Market Slides On Euro Fears
Stocks are trading lower with traders focused on a sliding euro and rising Italian bond yields and bank exposure. Shares of AAPL are off with the rest of technology. 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 8.5x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).
How To Use Apple Guidance To Properly Assess Actual Earnings (Bullish Cross)
Apple’s earnings guidance is entirely useless. Begin the analysis by looking at Apple’s revenue guidance. From there, Apple typically sandbags gross margin by 250 basis points on a very consistent basis. Because Apple consistently under-estimates its expenses by about $50 million, add that to operating expenses. That will get you down to operating income which Apple typically sandbags by $15 million. That will get you down to net income before taxes, which recently the tax rate guidance has been almost perfect. Reverse engineer what Apple expects in outstanding diluted shares and you’re set. No problem.
Apple Stock Is “Fantastically” Undervalued (CNN Money)
Apple’s current stock price implies the company’s earnings will grow minus 2% in perpetuity. Well, Sanford Bernstein analyst Toni Sacconaghi drilled a little deeper and found a series of what he calls “fantastically pessimistic assumptions.” He says that, “What makes Apple’s valuation truly astonishing to us iis that the iPhone and iPad — which together drove 87% of its revenue growth and an estimated 91% of its profit growth last year — are exposed to secular tailwinds.” The company is growing like gangbusters.
The MacBook Air Will Continue To Destroy The Ultrabook Market (SlashGear)
J.P. Morgan analyst Mark Moskowitz made it clear to investors that he believes the Ultrabook market will continue to be dominated by Apple’s ultra-thin MacBook Air well into next year at least. While most Ultrabooks are priced up and above $1000, with only a few sitting below that mark, the MacBook Air still has a major edge over any competitor already released or released in early 2012. With competing Windows-based machines not nearly as pretty or perfect, he’s probably right.
Best Buy Comments Another Indicator Apple Will Have A Blow Out Quarter (AppleInsider)
Amidst falling profits and missing Wall Street expectations, Best Buy (NYSE:BBY) executives singled out Apple’s iPhone 4S and iPad 2 as some of the company’s strongest selling products during the holiday shopping season. The positive comments are yet another indication that Apple is on track to post a record breaking holiday quarter.
Apple TV Commands One-Third Of The Connected TV Market (AppleInsider)
While consistently branded as being a “hobby” for Apple, sales Apple TV make it the most popular device in the category, predicted to sell nearly 4 million of the the nearly 12 million TV boxes in the market, according to Strategy Analytics. Apple is ahead of dedicated TV box systems from Boxee, Iomega and Roku. Only 8% of U.S. households currently own a “connected TV” player, but of that population, 32% have chosen Apple’s model.
Apple Has Nearly Twice The App Download Of Google (CNN Money)
On the heals of Google’s announcement that Android users had downloaded 10 billion apps, Apple announced that its customers had downloaded nearly twice as many, or 18 billion, from the App Store. And like Google, its number was growing by 1 billion downloads per month. Apple did have nearly a 2 year head start however. Additionally, more than 100,000 apps have been downloaded from the Mac App Store, for which there is no Google equivalent.
Android And iOS Control 82% Of The Smartphone Market – BGR
Google’s Android platform and Apple’s iOS dominated the U.S. smartphone market in 2011, according to The NPD Group. Android and iOS extended their lead while companies like RIM and Microsoft scrambled to reform strategies. Google’s Android platform represented 53% of the U.S. smartphone market through October in 2011 while Apple’s share grew to 29%. RIM’s market share with the BlackBerry OS dropped to 11% and Microsoft’s Windows Phone continued to struggle out of the gate with less than 2% of the market.
iOS Is Still The App Developer Platform Of Choice (Flurry)
Despite the fact that Android has more market share than iOS (as noted above), developers still prefer the iOS platform as the place to make an application first, according to Flurry. About 73% of apps created for the fourth quarter are based on iOS, compared with 27% for Android. At the start of the year, 63% of developers were focused on iOS versus 37% on Android. That flies in the face of Eric Schmidt’s recent comments that Android would be the primary platform for developers by next year.
iTunes Finally Available In South America (mocoNews)
Nearly 12 years after it first launched, the iTunes Store has gone live in Brazil and 15 other Latin American countries, as the region’s consumer digital content market takes off. The store brings 20 million songs. iTunes Match will also get its first non-U.S. roll-out in Brazil. The interesting thing about the Brazilian market is that a majority (60%) of digital sales there are from subscriptions (Telefonica-owned Terra music service).
Apple Rumored To Buy Fabless Semi Company For Half A Billion (TechCrunch)
Apple is reportedly in talks to buy an Israeli fabless semiconductor startup that specializes in flash storage solutions, Anobit. The rumored ticket price would be between $400 million to $500 million. The company’s signal processing technology makes cheap non-volatile memory as reliable as the more expensive stuff. The acquisition would presumably give Apple greater control over high-performance solid-state memory for the MacBook Pro. This would only be Apple’s 5th hardware acquisition in 20 years.
Heather Leonard is the Apple analyst at Business Insider.