Apple Can Surge to $700 in 2014

Apple stock should rebound in 2014, after under performing the broader market in 2013.

Jan 14, 2014 at 9:30PM

Apple (NASDAQ:AAPL) underperformed the S&P 500's 26% run in 2013, with the stock up roughly 5%. However, the company's product refresh late last year, coupled with its long-awaited deal with China Mobile (NYSE:CHL), has the potential to drive Apple shares to its previous all-time highs. Apple rebounded at the end of 2013, but at $530 Apple is still cheap compared to its underlying value and has one of the cheapest valuations among large-cap technology peers.

Gaining market share
Apple has a strong foothold in the U.S. and developed markets, and continues to increase its market share. The company's iPhone 5s has been well received by consumers and should enable the company to gain more ground in the enterprise space, due to more security features like the fingerprint sensor.

In the U.S., Apple's share of mobile OS at 41.2% of total smartphone users at the end of November, and phones running on Google's (NASDAQ:GOOGL) Android platform took the lead position with 51.9%, according to comScore. Apple and Google are both adding more users in the U.S. at the expense of smaller players including BlackBerry and Microsoft.

The global smartphone market is expected to rapidly expand in the next few years, from roughly 1 billion units annually in 2013 to more than 1.7 billion in 2017. Both iOS and Android are well positioned to capitalize from the growth of smartphone adoption across the globe.

China Mobile will drive incremental sales
Apple's long awaited deal with China Mobile is a positive for the company, and should drive the company's iPhone unit sales in the gigantic Chinese market. China Mobile's massive customer base of more than 763 million customers will aid Apple's top line for the next few years.

Since Apple generates roughly 53% of its total revenue from the iPhone, the China Mobile deal would propel Apple sales in 2014 and beyond. Apple's iPhone 5s and 5c will hit China Mobile's massive retail network in a few days. And a growing middle-class population in China will ensure that the demand for the iPhone is pretty high.

China Mobile already has more than 181 million 3G subscribers, and is constructing the largest 4G network in the world. And faster Internet speeds will drive service sales from iTunes and the App Store. Sales from the App Store surged past $10 billion in 2013, and the China Mobile deal will almost certainly drive up revenues from software and services in 2014. In addition, demand for other Apple products, including the iPad and Mac, will increase as a trickle-down effect from a broader presence in China.

Earnings growth
Apple is still trading at a sizable discount to bigger tech names, and is a reasonably cheap stock. And if Apple accepts the proposal by activist investor, Carl Icahn, the company's EPS can increase dramatically.

Even if they reject Icahn's offer, they have a massive buyback program. Apple's diluted share count decreased to 909 million in the last quarter. With $37 billion of authorized funds for share repurchases left to be executed, this massive buyback will certainly increase Apple's EPS in the longer term. And since Apple's cash hoard is in excess of $146 billion, the company is almost certain to increase its share repurchase authorization after the current plan concludes.

Earnings forecasts for Apple's big holiday season are quite bullish. Sell-side analysts are modeling that Apple's EPS will be $14.07, which will be a year-over-year increase of earnings per share for the first time in five quarters.

Going Forward
Apple's earnings multiple should expand in 2014, based on its China Mobile deal and strong consumer adoption of the iPhone 5 line. Investors will get additional color on Apple's recent China Mobile deal and other product developments when the company reports earnings in a few weeks.

Apple's valuation multiples are significantly lower than other rapidly growing large-cap technology peers like Google and Amazon, and is being valued like a mature company like Microsoft. But Apple's innovation engine is more robust than Microsoft's, at a much smaller R&D budget as well. Lastly, the biggest share repurchase in history will certainly help the company's stock price propel to the $700 mark. 

A great opportunity, courtesy of The Motley Fool
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, China Mobile, and Google. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers