Will Apple Outperform in 2011?

Each year, we take a look back in order to look ahead. We do this by industry, by trend, and ultimately by stock. Here's a closer look at Apple (Nasdaq: AAPL  ) , Fool style.

Foolish facts

Metric

Apple

CAPS rating (out of 5) ***
Total ratings 24,905
Percent bulls 91.7%
Percent bears 8.3%
Bullish pitches 4,859 out of 5,436
Highest rated peers Super Micro Computer, NCR Corp., Stratasys

Data current as of Dec. 28.

With just three stars, Fools who've rated Apple in CAPS remain undecided about the company's prospects. Most agree Apple is pressuring Dell (Nasdaq: DELL  ) in the desktop and laptop markets, and Research In Motion (Nasdaq: RIMM  ) and Nokia (NYSE: NOK  ) in smartphones. Yet few agree when it comes to the Mac maker's valuation.

"Everyone thought the exact same things about Microsoft in the early 2000's as they do about Apple today. Current P/E trends cannot continue forever. It's easy to hop on the Apple bandwagon and say that it's going to be an easy outperform. Apple's products must continue to change as fast as the current fads do," wrote Foolish investor 1947StockGuy earlier this month.

Looking back to look forward
Disagreement is also reflected in the year's big Apple stories at Fool.com:

  • In January, Anders Bylund named Apple as his pick for the worst stock for 2010. More than 1,500 Fools disagreed with my Foolish colleague.
  • Six months later, the crowd looked smart: Apple passed Microsoft (Nasdaq: MSFT  ) in market value to become the new king of tech. Several of us began to wonder if it was too late to buy Apple.
  • Not two months later, a buying opportunity would emerge when the Mac maker was embroiled in a full-blown scandal over performance issues with the iPhone 4's antenna. "Antennagate," the media dubbed it.
  • Around the same time, Apple fired a fresh salvo in the war for the living room by introducing a $99 version of Apple TV and 99-cent streaming video rentals. A partnership with Netflix (Nasdaq: NFLX  ) soon followed.
  • By September, we'd seen enough. Foolish editor and tech analyst Eric Bleeker announced our intent to buy shares of Apple. "I'm comfortable with the risks we're taking on to buy Apple at today's prices," Eric wrote at the time.

The shares are up 18% since, thanks in part to strong iPad sales, rumors of a Verizon (NYSE: VZ  ) iPhone, and excellent financial performance:

Fiscal 2010 Quarterly Performance

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Revenue growth 32.0% 48.6% 61.3% 66.7%
Normalized net income growth 44.3% 68.9% 59.4% 46.3%
Gross margin 40.9% 41.7% 39.1% 36.9%
Return on capital 35.0% 26.5% 25.7% 30.0%

Source: Capital IQ, a division of Standard & Poor's.

And here's what analysts expect from Apple over the next two years, according to data compiled by Capital IQ:

Capital IQ Estimates

2011

2012

Revenue estimate $89,302 million $103,106 million
Normalized profit per share estimate $19.30 $22.69

Source: Capital IQ, a division of Standard & Poor's. Data current as of Dec. 28.

Foolish outlook: bullish
Apple strikes me as appropriately valued. Why? First, 16.8 times next year's normalized earnings estimate is reasonable for a company growing as fast as Apple is. Second, that P/E doesn't account for the $51 billion in net cash and investments on the Mac maker's balance sheet. Despite this, Anders remains unconvinced.

"None of the doomsday scenarios I imagined for Apple actually happened in 2010. That doesn't mean they can't or won't happen in 2011 or 2012, and the stock is now riskier than ever given the steady price advances. Apple can't afford any mistakes next year, lest investors suffer the consequences of a tarnished halo," he said when I asked him about his underperform call.

I'm not so sure that's fair, yet Anders and I have had our say. Now it's your turn to weigh in. What do you think of Apple's prospects at current prices? Please vote in the poll below and then leave a comment to explain your thinking. You can also rate Apple in Motley Fool CAPS.

Interested in more info on the stocks mentioned in this story? Add Apple, Dell, Research In Motion, Nokia, Microsoft, Netflix or Verizon to your watchlist.

Apple and Netflix are Motley Fool Stock Advisor selections. Stratasys is a Motley Fool Rule Breakers recommendation. Microsoft is a Motley Fool Inside Value pick. Motley Fool Options has recommended a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple and Microsoft and is also on Twitter as @TheMotleyFool. When it comes to stocks, the Fool's disclosure policy is a lookie-loo.


Read/Post Comments (30) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 28, 2010, at 4:21 PM, xmmj wrote:

    "Apple's products must continue to change as fast as the current fads do," wrote Foolish investor 1947StockGuy earlier this month.

    This statement illustrates a very common misconception among critics of Apple: that their success is due to their products being "current fads." This is not the case. While it is true that Apple has to continually compete with some very competent companies, their products are not hula-hoop fads.

    Apple products are appreciated because of the unrivaled care and dedication that goes into their design. (And please take "unrivaled" here very seriously.) This care is noticeable in everything from the internal layout of the computers, to the packaging. It is most evident in the user interfaces they design which are what drive the adoption rate of their products.

    Look at the satisfaction ratings on Apple products. They ALL are head and shoulders above the rest of their competitors. Look at iPod - still far and away the leader after 10 years. Part of this is due to the incredible vertical integration, and part is due to the fact that customers love them for what they are - not for some passing fad.

    Ease of use - this is why so many people who switch from MS Windows to Macs keep saying "I will never go back!"

  • Report this Comment On December 28, 2010, at 4:23 PM, melegross wrote:

    It's easy to predict a successful company will do poorly. But it isn't a brilliant call to do so. At some point, apple won't have a new product to give it enormous sales growth. When will that be? Who knows. But they don't need a new product line every year. 2011 will see Apple well positioned.

  • Report this Comment On December 28, 2010, at 4:45 PM, pepsyman1 wrote:

    I surely hope that Anders Bylund doesn't do this for a living. If he does, he cost his investors a 50% gain this past year with his doomsday scenario guesses. And that's all they are, guesses. Apple's core customer is no longer just zealots who like having a choice outside of the Microsoft derived PC world...that customer is now everyone that wants a an electronic product/computer that simply does what it's advertised to do. Apple continues to innovate with new products, but their popularity simply converts more users to their existing lineup. The writing has "been on the wall" for the ipod for years, but they continue to sell 40 million of them yearly, the Mac had its best sales year ever in 2010, the iPhone is 4 years old now and they still can't make them fast enough and nobody has a true handle on how many iPads they will sell in 2011. There is nothing about Apple's products that are fad except maybe their styling, but considering how good they are at design in general, they seem to be the one company setting the styles, not following them. I expect Apple's success will continue to evolve and change, but make no mistake, continue it will.

  • Report this Comment On December 28, 2010, at 4:56 PM, hellomojo wrote:

    Apple is well positioned to continue their gains for at least a few more years. They have the best products in most of the fields in which they compete. While some competitors are gaining ground with their latest offerings they still cannot provide the complete, easy to use, integrated solutions Apple does. Their growing internationally and in North America and have tons of cash to develop and acquire. Investors will continue to make good cash betting on Apple!

  • Report this Comment On December 28, 2010, at 5:19 PM, drillerjim101 wrote:

    I am a happy shareholder of Apple for the past 8 years and continue to add to my position from time to time. When my kids started buying Ipods and Iphones and mac computers many years ago, I began my own wonderful addiction for the latest Apple "fads" and my life is better for it. And each of these " toys" came with top notch customer service. No, we are not talking about fads and toys. We are talking about life quality.... And first rate products and service in a world hell bent on mediocrity. Take my advice...buy Apple today and 5 years from now you will be glad you did.

  • Report this Comment On December 28, 2010, at 5:41 PM, artlaz wrote:

    Apple is the market leader in one product, MP3 players, in all their other lines they have single digit market penetration - there's lots of room to grow. I could see Apple growing to a 20% share of world PC shipments (it's now at about 3.5%) and the situation in cell phones is very similar - Apple has about a 4% share. And, then there will be new products - maybe a 3D big screen TV.

  • Report this Comment On December 28, 2010, at 6:46 PM, stumarg wrote:

    When someone can name another mp3 player that somebody bought other than the iPod I will stop buying apple stock. A week before Christmas and the only place I could find a 16 gig nano was from the apple website and I still could not get it for Christmas. Some fad!

  • Report this Comment On December 28, 2010, at 7:46 PM, agnie wrote:

    Apple is the best company in the world with inovation.

    It will continue it growth well into 2011 and 2012

    even at current price $325 it is a buy .With earning at projected 2011at $22.00 this stock will hit close to $400 per share.

    P=M X E

    Earning(E) and Multple (M) are both expanding

  • Report this Comment On December 28, 2010, at 9:29 PM, PeyDaFool wrote:

    Tim,

    You'd be smart to question Ander's advice...

    On August 28th, 2009, Anders wrote an article entitled, "How Cheap is Apple, Really?" in which he stated: "Apple is also considerably more expensive than most of these high-tech peers... Apple comes out looking fairly valued at best, and a bargain only if you put it next to Google...In fact, if you're looking for an affordable gadget designer, Garmin might be your best bet."

    Since August 28th, 2009

    ...Apple is up 85%

    ...Google is up 19%

    ... SPY is down 3.5%

    ...Garmin is down 17%

    Anders conveniently skipped my comment and moved onto the next commenter when I brought this up in his column. I'd love to hear his commentary on his incorrect advice.

    He continued, "If I owned any Apple stock, I'd sell today and lock in some profits -- because these prices can't last."

    http://www.fool.com/investing/general/2010/11/20/does-apple-...

  • Report this Comment On December 28, 2010, at 9:37 PM, Gigarob wrote:

    Okay, I'm say it. Apple products are over rated. The iPod is an over priced cash cow. The iPad was cool when it first came out but it now trails the competition in features and its very proprietary.

    Apple's insistence on controlling every aspect of its development community will be its eventual demise.

    At this price Apple cannot afford a misstep. Its that simple. I'm not sure there is enough innovation left in them to keep it going. I hope I'm wrong.

    One thing Apple could come out with that nobody is talking about is an Xbox or PS3 like box. This could propel them for a couple years by integrating it into Apple apps, Apple TV and the iPhone.

  • Report this Comment On December 28, 2010, at 9:49 PM, PeyDaFool wrote:

    Pardon me, my mistake. Ander's results are as follows proceeding his prediction on August 28th, 2009:

    ...Apple is up 91%

    ...Google is up 29%

    ... SPY is up 22%

    ...Garmin is up 5%

  • Report this Comment On December 28, 2010, at 10:07 PM, Gigarob wrote:

    Okay, I'm going to say it.

    Apple's insistence on controlling every aspect of its development community will be its eventual demise.

    At this price Apple cannot afford a misstep. Its that simple. I'm not sure there is enough innovation left in them to keep it going. I hope I'm wrong.

    One thing Apple could come out with that nobody is talking about is an Xbox or PS3 like box. This could propel them for a couple years by integrating it into Apple apps, Apple TV and the iPhone.

  • Report this Comment On December 28, 2010, at 11:21 PM, Mannyschotz wrote:

    How does someone Anders Bylund continue to have a job as a financial analyst? To pick Apple as one of the worst stocks of 2010... I mean, wow, you can't miss any bigger than that.

    The frightening thing is (if you're someone who actually listened/listens to Anders Bylund) you lost huge money by selling your Apple stock. It's gone. And if you listened and didn't buy, you lost real money, too.

    I'm no financial genius. Fortunately, it didn't take one to see 2010 was going to be a banner year for Apple. First, they create the iPod, then the iPhone, both monster successes, redefining their industries. Quite literally changing the world.

    Then word came that Apple was prepping a tablet computer. We didn't know what it was going to be called, but we knew it was coming. Why, given the recent track record of Steve Jobs & Co., would you think it would be anything but revolutionary?

    Stupid people don't invent iPods and iPhones. Stupid people don't get lucky twice -- not on that global scale.

    I doubled my position in Apple as soon as I heard a tablet would be forthcoming. I would have tripled it could I have afforded to do so. Thank God I trusted my own instincts and not those of an 'analyst' like Anders Bylund.

    I don't mean this as a personal attack, it's just I think guys like Mr Bylund should be reminded that their horrific advice -- which commands an audience and continues to this day -- costs real people real money.

  • Report this Comment On December 28, 2010, at 11:27 PM, Mannyschotz wrote:

    (corrected typo)

    How does someone like Anders Bylund continue to have a job as a financial analyst? To pick Apple as one of the worst stocks of 2010... I mean, wow, you can't miss any bigger than that.

    The frightening thing is (if you're someone who actually listened/listens to Anders Bylund) you lost huge money by selling your Apple stock. It's gone. And if you listened and didn't buy, you lost real money, too.

    I'm no financial genius. Fortunately, it didn't take one to see 2010 was going to be a banner year for Apple. First, they create the iPod, then the iPhone, both monster successes, redefining their industries. Quite literally changing the world.

    Then word came that Apple was prepping a tablet computer. We didn't know what it was going to be called, but we knew it was coming. Why, given the recent track record of Steve Jobs & Co., would you think it would be anything but revolutionary?

    Stupid people don't invent iPods and iPhones. Stupid people don't get lucky twice -- not on that global scale.

    I doubled my position in Apple as soon as I heard a tablet would be forthcoming. I would have tripled it could I have afforded to do so. Thank God I trusted my own instincts and not those of an 'analyst' like Anders Bylund.

    I don't mean this as a personal attack, it's just I think guys like Mr Bylund should be reminded that their horrific advice -- which commands an audience and continues to this day -- costs real people real money.

  • Report this Comment On December 29, 2010, at 12:45 AM, NOTvuffett wrote:

    What is AAPL known for? iPod, iPhone, and now iPad. Hey wait, I thought they were into computers!, lol.

    I think Gigarob has a point, their insistence on controlling apps will lead to their downfall as it has led to limited market penetration with their computers.

    I am not saying AAPL can't do well from here, they have a very loyal base of customers and investors, just that the numbers for investors don't look that good to me.

  • Report this Comment On December 29, 2010, at 5:18 AM, rjc1961 wrote:

    i wish they made all apple products in the good old u.s.a. traderbob,we sure could use the work .

  • Report this Comment On December 29, 2010, at 7:46 AM, afterburner2 wrote:

    Apple makes products for mainstrean folks. I'm sure there are better products for niche markets, so let the competition have them. Apple has volume and profits to show for it. Go to the mall this season? Which store was busy? Which store is always busy?

    Apple has a huge office building somewhere full of developers working on new gadgets we haven't even imagined yet. This is their proven record. Good enough for my money.

  • Report this Comment On December 29, 2010, at 8:26 AM, BioBat wrote:

    Millerman,

    Is that supposed RIM tablet going to really take over the tablet market with only 2 hours of battery life?

    Didn't think so.

    The first poster is bang on. Apple products are mainstays and not going anywhere because they are designed extremely well and simple to use NOT because they're a fad.

  • Report this Comment On December 29, 2010, at 10:08 AM, wordjunkie wrote:

    It's a very simple concept I learned from Peter Lynch: Go to the mall and see which stores are busy. You go to the mall today and it will be empty, but the Apple store will be packed. Enough said.

  • Report this Comment On December 29, 2010, at 10:36 AM, Emperor2 wrote:

    Why do people talk about "products"? Apple doesn't sell just products, they sell an ecosystem that integrates all of their products into a cohesive whole that is easy to use with great customer service. Other companies can and will make better "products". So what? A "product" is not an ecosystem that allows all items in that ecosystem to seamlessly communicate with each other. Until supposedly intelligent people understand that concept, they will continually harp on "so and so's new product is better than Apples". I don't know how many other companies understand this concept.

    If you don't like Apple or Apple's products, that's fine. But you are cheating yourself out of mega profits it you let your personal dislike of Apple override your rational thinking about what will happen to their sales and stock price. Apple has never been first with any product. They were not first with an MP3 player, with a phone or with a tablet. They just improved upon what was already in the marketplace. They don't have to be first. They don't even have to have the "best".product. All Apple has to do is integrate a product into their ecosystem in a way that creates a good customer experience. People that do not understand this concept, and let their hatred of Apple override their rational thinking, will lose out on the money they could have made buying Apple stock.

    Most people have heard about Apples new data center in NC. Some may not have heard that Apple has has applied for a building permit to about double the size of the initial center (and the initial center still isn't fully up and running). Apple has also purchased a 74 acre parcel of land across the street from the original center. Do you think that Apple has decided to spend over one billion dollars (and potentially double or triple that before they are finished) just cause they like to spend money? I have no clue as to Apple's vision is for this center(s) but I'm sure it's designed to help them (and their stockholders)make more money.

  • Report this Comment On December 29, 2010, at 12:24 PM, FutureMonkey wrote:

    Mean estimate sales for financial year 2012 are north of $102B or 57% growth from 2010.

    Considering that AAPL managed to double sales from 32B to 65B and triple earnings between 2008 and 2010 (remember the worst recession since the great depression), I'd say that AAPL is in a good position to beat those analyst estimates with anything vaguely resembling a normal economy.

    Trading at 20 TTM earnings and 15 forward earnings. AAPL seems undervalued at todays prices. Similar valuation at 300B market cap relative to sales as it was trading for most of the last decade.

    Even if there is no change in price/sales, price/earnings, price/cash flow between now and 2012 and AAPL simply meets analysts expectations, we could still be looking at AAPL with a 470B market cap or roughly $500 per share. I'd say that is likely a beat of the SP500.

  • Report this Comment On December 29, 2010, at 1:07 PM, Turfscape wrote:

    Apple's gains won't last forever...eventually Apple will see flat prices or a price decrease, if not in 2011, then in 2012...or maybe in 2013...or maybe 7 years from now...or maybe in 2025. But, eventually Anders Bylund will be correct, sort of.

    In the meantime, I'll keep riding Apple's explosive growth to prosperity.

    Oh, and I'm really not a hater on these board, but Anders Bylund couldn't predict snow in winter in Alaska...let alone what Apple will do in the market.

  • Report this Comment On December 29, 2010, at 2:05 PM, hdb2 wrote:

    I remember when Apple stock was $200 in 2007. One of the advisors I trust said it was overpriced and would have a significant drop. He was right. It dropped below $90 -- well over 50%. I held on to it and was very unhappy. Things change and now I am very pleased that I kept it as it rose above $320. I am still holding it. However, I am looking for a good strategy to protect the paper profits that I now enjoy. (It would have been nice to have been the owner of Puts at the end of 2007.)

  • Report this Comment On December 29, 2010, at 11:10 PM, Srsteve wrote:

    I am visiting Hong Kong and I am amazed at the black market price for iPhones. Presently the price is 15 percent above list and only the telecom companies have stock. A cottage industry has developed with Chinese mainlanders sending runners in to buy iPhones.......every storefront has offers to buy iPhones above list and it seems 90 percent of Hongkongese are using this phone.

    Reports of thieves stealing iPhones out of the hands of users are rampant.

    These are the facts..you decide

  • Report this Comment On December 30, 2010, at 11:17 AM, owlbert wrote:

    Mac's will continue to be limited to the home computer market. Mac OS does not support logging into a domain and enforcing domain policies. MS Office for Mac is not 100% compatible with Windows Office. While most documents come across OK, there are quirky differences in formatting. For these reasons, the enterprise computing will remain Windows based.

  • Report this Comment On December 31, 2010, at 2:12 AM, kbear2 wrote:

    owlbert wrote: "Mac OS does not support logging into a domain and enforcing domain policies." What is that supposed to mean? Sure is news to me and thousands of others who have several domains and encounter no problems.

    As to MS Office, it won't be long before other applications, some online, totally supplant that dinosaur. It has become so unwieldy that people are moving to cleaner more productive programs, many of them free or much cheaper than Office.

    Neither of those are reasons that Windows will be the enterprise choice. More likely it will hang on by virtue of inertia and ingrained lack of initiative.

  • Report this Comment On December 31, 2010, at 2:12 AM, commercenary wrote:

    Owlbert:

    I am one of hundreds of physicians working with a large regional healthcare corporation. Nearly the whole corporation uses an electronic medical record (EMR) in patient care. I log into the EMR when on-call or otherwise off-site. I use my home Apple Macintosh to do this with appropriate security clearance. I am fully functional in the EMR at home. Further, I am able to transfer data from my Apple to the EMR when necessary (e.g., cutting-and-pasting text/other data).

    There's a huge overlap between the "home computer" market and business. And academia. In fact, the default state might BE such an overlap.

  • Report this Comment On December 31, 2010, at 12:07 PM, Puck68 wrote:

    It never ceases to amaze me that otherwise intelligent people don't understand the difference between Apple and other tech companies: Most tech companies work to improve their tech (more bells and whistles) and hope that impresses customers; Apple begins with the end-user experience, and builds its tech to follow. Bells and whistles are intellectual, experience is emotional. That's why when people "experience" an Apple product, they love it, and connect emotionally. That's where loyalty comes from: the emotional side of the equation. That's where I have and will continue to put my money.

  • Report this Comment On December 31, 2010, at 1:45 PM, foolisholdgirl wrote:

    One of these posters mentioned they remember when Apple was at $200 a share. I started buying it when it was $60 which was after I bought an iPod mini. Up until the iPod, mp3 players were a curious liitle thing on a back shelf somewhere at the local big box electronics store. Now people think of iPod as synonymous with mp3 players and that is the point. Apple is not fad follower they are THE creators of user friendly devices that create the fads you are talking about. Just as the iPod had drastically changed the the face of the home stereo system the iPad will influence personal computing and that surface is just begining to be scratched while the rest of consumer electronics industry plays catch up.

    The only thing I see hurting their growth is an extended recession that cuts in to disposable income.

  • Report this Comment On January 02, 2011, at 3:37 PM, audie116 wrote:

    I have made money on Apple and think it is a great stock and a great company. My concern is Steve's health. Does anyone have a sense of where the stock would go if they lost him do to health concerns? How much of where they are now is a direct result of his leadership? They languished without him in the past.

    Just say'n

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1412150, ~/Articles/ArticleHandler.aspx, 10/2/2014 12:43:19 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement