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Is Apple Still Worth More Than $400?

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Just as when Apple (NASDAQ: AAPL  ) was hitting new highs daily, it's clear momentum is now with those betting against this consumer products icon. Now it seems to hit new 52-week lows every day. Indeed, its current $420 price tag was last reached in January 2012, but at the time it was on the way up to its all-time intraday high of $705 a stub. The former golden child can't do anything right these days, and it's worthwhile to ask whether there are new lows in its future, or can it turn around from here?

High-falutin' honeys
Obviously there's a lot to like about Apple. Despite a lot of consternation about the pricing model it chose for its iPad Mini, the market researchers at NPD DisplaySearch say sales of the Mini are outpacing those of the iPad 2 by almost four-to-one. Mini shipments hit more than 5 million units in January from the month before while iPad 2s fell to 1.3 million from 7.4 million in December.

Obviously, the Mini hasn't completely made up the difference between the two models, but it's clear the higher price Apple chose for the smaller tablet isn't the hurdle critics at first contended it would be. They might have sold a few more Minis had they gone with the lower pricing schedule, but they would have sacrificed margins, too. By selling more iPads of whatever stripe, it also blunts the ability of Apple's rivals to steal market share.

Eating their young
It's estimated Google's (NASDAQ: GOOGL  ) Nexus 7 tablet sold at most 4.8 million units in all of 2012, or less than the number of Minis Apple sold in January alone! So it doesn't matter if the Mini cannibalizes the iPad 2, Apple is still getting the revenue instead of Google (or someone else). As CEO Tim Cook says, "I see cannibalization as a huge opportunity for us. One, our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it and so we never fear it."

Analysts initially anticipated Apple would ship 60 million iPad 2s and 40 million Minis, but now they believe the Mini will eclipse the larger display model 55 million to 33 million. While that seems like it's selling fewer total iPads, it's still 50% more than it sold in 2012 when they moved 58 million units. So don't get caught up in the analysts' numbers game; Apple continues moving the needle without giving up the profits.

Source: SEC filings.

Similarly, Wall Street is bearish about Apple's iPhone sales, with a Credit Suisse analyst breaking out the worry beads because he anticipates only 153 million units will be sold in 2013, even though that's 26% more than it sold in 2012. With a new model expected out later this year and a lower-cost version possible for China, the probability it could surpass those numbers seems pretty good to me. Even the Credit Suisse analyst expects Apple to "return to its growing ways."

Source: SEC filings.

Hey Mac, can you spare a dime?
Of course not everything is coming up roses for Apple; Mac sales continue to slide. But even that's not completely unexpected considering the growth the iPad has achieved (see note above about cannibalization), particularly because of the growth opportunity the tablet market represents.

Analysts continue to expect tablets to surpass PC sales sooner rather than later. Researchers at Canalys says PC market share will tumble to 65% in 2013, down from 72% last year, and within three years tablets will surpass the PC as they grow on a compounded annual basis of 35% a year, hitting 384 million units.

Whereas the old dynamic used to be Windows versus iOS, now it will be Apple's OS against Android. Certainly on the smartphone platform Google's operating system dominates, with 71% share expected this year, but that will be peak. It's anticipated BlackBerry's new phones will claw back some share and move above the 5% share it currently holds (even with the new BB10 on the market) and Microsoft is expected to pull a few percentage points more with its Windows Phone 8 system.

Yet in the PC market, it's Apple's to lose, and it's not giving up its grip. Canalys also found that it had more than 20% of the market for the first time ever, eclipsing both Hewlett-Packard and Lenovo, both of which had just an 11% share. Samsung and Dell rounded out the top five.

More than one lever to pull
The combined strength of Android devices is definitely a challenge to Apple and iOS, but so long as it's able to avoid supply issues like those it experienced in the fourth quarter, it should once again own more than half of the tablet market itself.

As an Apple shareholder nursing the long slide in its stock, it's easy to expect it to continue to go lower because of Wall Street's constant drumbeat of negativity. Yet I see that as opportunity because it means the consumer products specialist will only surprise the market going forward, leading to large spikes higher. I don't plan on selling my Apple stock anytime soon, but you can let me know in the comments box below whether you agree Apple has what it takes to not only stay above $400 a share, but regain the $500 or $600 level in the near future.

A sky-high opportunity
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (3) | 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 March 05, 2013, at 6:28 PM, nlosborne wrote:

    This article has to be flawed… at least to some degree. The author says that apple can't seem to do anything right these days… well, "these days" applies to the drop they've experienced since their September highs. Well, since early October, apple has not released a single new product, and they have only had one earnings announcement. Their 4Q earnings were a new record for the company and iPhone shipments surges to 48 million! Up 30% from 4Q 2011. So, what has apple done wrong? Grow iPhone sales? And don't bother saying that Samsung is out innovating apple. Samsung hasn't had any major product releases either! Oh and for good measure, Apple's 2 year old design iPhone 4S with a 3.5 in screen outsold samsung's best in 4Q!!!

  • Report this Comment On March 05, 2013, at 8:18 PM, 2sour wrote:

    I completely agree with nlosborne above. I'm not an Apple fanboy ... I don't own a single Apple product, but when I look at the sales numbers and financial figures, I can't understand why so many are so negative about Apple. They are outselling everone, and their margins are higher than anyones. As far as innovation, Apple has single-handedly created several entire markets and they have plenty of resources to do it again. What markets have Samsung created?? As far as I'm concerned, they are little more than a copy machine ... copying Apple inventions.

  • Report this Comment On March 05, 2013, at 8:38 PM, NOTvuffett wrote:

    You guys are missing the bigger point: will it blend?

    By the common metrics used for evaluating stocks, AAPL looks like a screaming buy. On the other hand, one must wonder what has propelled the share price of AAPL to these low levels. Sometimes the market is irrational, but it seldom fluctuates without a reason.

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