This week’s Apple trading strategies (10/22-10/26)

A place for Apple 3.0 subscribers to share their ideas.

To get things rolling, here’s Daniel Ives, formerly of GBH Insights, justifying the $310 price target he put on Apple last week when he initiated coverage for Wedbush. (See here.)

Services business drives Apple’s success, analyst says from CNBC.

Disclaimer: I’m a journalist, not a trader, and have never owned any Apple. So don’t blame me if you drain your IRA doing something you read about here.

2 Comments

  1. Robert Paul Leitao said:
    In my view, the primary drivers of Apple’s share price appreciation are net income growth and anticipation of continued net income growth. Mr. Ives is forecasting strong net income growth primarily fueled by growth in Services revenue.

    I could confidently argue on a per revenue dollar basis Services revenue should be awarded a higher valuation than revenue sourced from device sales. Apple’s Services revenue has less of a seasonal cycle than device sales and fixed costs are apt to be recovered more quickly as revenue volume rises.

    What the greater recognition by analysts of the rising level of Services revenue represents is not only a greater awareness of the company’s fastest-growing revenue segment, it represents a fuller recognition of the company’s widening economic moat and the value of the company’s eco-system in its entirety.

    As long as Apple’s net income continues to rise and prospects for future net income growth remain strong, the share price will advance.

    I’m not one to be concerned with Apple’s trailing earnings multiple. In isolation it’s pretty much a meaningless number and nothing more than a statistic. Because Apple is engaged in a massive share repurchase program, the share count today will be significantly different than the share count three months and one-year from now. I place more weight behind the forward earnings multiple. The higher the Street consensus estimates the lower the forward multiple and the lower the forward multiple the greater the capacity for that multiple to expand.

    Apple is both a growth company and a value investment. For long-term investors, the company’s ability to sustain net income growth while enriching shareholders through a continued reduction in the fully diluted share count and a continuing rise in the quarterly dividend is what makes Apple an attractive investment today.

    I also expect the share price to continue on its northward trek. Mr. Ives is just among the first professional analysts to publicly forecast a $300 share price.

    2
    October 21, 2018

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