MacDailyNews - Where Mac news comes first

This isn't even counting bumps in Mac market share and the potential revenue down the road from a growing and expanding AppleTV franchise.

I hope he's right.

Also, don't forget the following revenue streams:
1) Updated iPods in time for Christmas Season
2) Increased iPhone sales for the Christmas Season
3) Update iMacs
4) The release of Leopard

AAPL will continue its meteoric rise!

He didn't even consider people who buy 2 iPhones, like the blender did.

Yes! Wall street is utterly shocked to find a large cap company that grows like a hot startup and has fabulous margins to boot. They have not dealt with AAPL in an honest way. The potential -- and likely to be realized -- earnings performance is staggering. Can you say "juggernaut"?

I'm in all of the way with the bulk of my net worth in AAPL stock. Many of my fellow Mac heads, with the courage of their convictions, will be getting filthy rich over the next few years. Those who only "look and see" to play it safe will be kicking themselves. As for the Apple haters, they will reap their reward -- missing one of the greatest opportunities in business and investing history.

LinuxGuy and Mac Prodigal Son: "I'm in all of the way with the bulk of my net worth in AAPL stock."

I kept on divesting, but AAPL always come out to claim the bulk of my net worth... I should not have divested. I could have retired by now (ok, may be not retirement, but enough to pay off my mortgage).

".....Yes! Wall street is utterly shocked to find a large cap company that grows like a hot startup and has fabulous margins to boot. They have not dealt with AAPL in an honest way.."

----------

Hmmm, I think the fact the AAPL has gone from $7 to $132 in the past 4 or 5 years is a pretty honest realization for investors.

I tried to convince everyone I could to buy AAPL at $15.80 like I did...after a 2:1 split, the cost basis of my $130 shares is $7.90. I was finally able to get some family to invest at $55 but my friends all laughed - they still laugh now...same old song and dance "Apple is over valued" they said it at $55, they said it at $130, and they'll still be saying it at $250.

I bought at $92.00 and still holding the shares.

Sadly, I was going to buy @ $60.00 but held off 'cause I've been burned on a few other stocks that I bought in the past; Nokia being one of 'em ! :-(

Moonie

All I wanna know is how I can get in living in Japan. I'm itchy to buy.

Bulls make money. Bears make money. Pigs get slaughtered.

I bought AAPL at the last split around $40/share. I whish I had more money then. All I can hope for now is a split--hopefully, a 4:1 split.

...just hoping.

@ LinuxGuy and Mac Prodigal Son

Some day we'll have to uncork a bottle of champagne and celebrate. =) Here's to the next $120 billion...

-c

2 words-- CHA CHING!!:<)

mdn MW=Power as in I wish I had bought as much APPL stock that was within my POWER. Sadly I didn't

I think a $40B increase due to the iPhone is more reasonable. Let's take his 20 million phones in 2008, at $500 rev per phone, that's what, $10 B in new revenue, right? Let's use Apple's 10% net margin, which gives us about $1B in income. Let's apply a high-end PE of 40, and we get, what? $40B in increased stock value, or about $40 per share.

@ KenC

Don't forget the cut Apple gets from AT&T;, and the fact that we're only talking about the US market. There are 1.3 billion Chinese that currently own zero iPhones.

All this means that, if others continue their growth paths as they have now, AAPL market cap (currently $115B) will zoom past:

HP ($118B)
Intel ($144B)
IBM ($162B)

After that, next target will be Microsoft ($282B). Now, as far as this one is concerned; if the above article turns out to be correct (double market cap by end 2008), and if MSFT continues to tread water as it has for the past few years, that would mean that in the next two years, Apple would be the biggest computer company out there (based on market cap). How about them apples?

Well, I just read the article and here are my thoughts:

Hartog says, "they will purchase more music and videos and from iTunes, providing about 50% margins and no additional costs to Apple." We know this to be wrong, as Apple's margins on music and videos is less than 10%.

Hartog says, "At an average spend of $50 per year per customer and 50% margins, that is $1 billion in extra revenue and $500 million in profits. Put that in to Apple’s earnings and multiply by AAPL’s PE of 40, and you have additional market cap of $20 Billion." We know that on avg, the iPod user has about 28 songs from the iTunes store, so let's be optimistic since most iPod users are pretty new and assume all of those songs are purchased in one year. So, $25 per year per customer, as some of those are albums, at 10% margins, which comes out to $5 million in income, not $500 million, and with a PE of 40, gets us to $200 million in additional market cap not $20B.

Hartog says Apple will capture 1% more market share which is about 1 million more computers, or about $1B in new revenue, and $100M in income, or $4B in additional market cap, not $20B.

Since Hartog doesn't know what commission Apple is getting for new ATT subscribers, and I don't have the foggiest, I'm just going to back that figure out and just look at the stuff we can make reasonable guesses about, and that's $80B of his $120B, leaving just $40B in new market cap. From the above, I've calculated that Apple will get about $4.2B in new market cap. Add in the income from 10 million phones and you get $20B in new market cap, though I think they'll sell closer to 20 million.

So, my estimate is between $24B and $44B in additional market cap, not counting ATT subscriber commissions, which Hartog admits he's just guessing.

Predrag:
MS isn't a computer company, it's a software company. Apple is a computer company, and will soon be bigger than HP. Once it passes HP, wouldn't it then be the biggest?

ChrissyOne, I'm Chinese and I have an iPhone, so that's one of 1.3+ billion.

Um, LInux guy, I think you're taking a huge chance if you have most of your net worth in Apple stock. Without comparing the companies, just think of all the people who had most of their net worth in Enron, or any of the other disasters. Even Apple can be hit by something unforeseen, and prudent investors ALWAYS diversify. If you were using hyperbole to make a point, OK.

"ChrissyOne, I'm Chinese and I have an iPhone, so that's one of 1.3+ billion."

I stand corrected! But that's still quite a bit of upside!

The payments to Apple from AT&T;are to significant to ignore. RIMM, the maker of Blackberry reportedly gets $6 a month for every Blackberry subscription. Steve Jobs probably negotiated a better deal, say 8 or 10 dollars a month for 24 months. That changes all the calculations, That's all profit. BTW, Blackberry has about 9 million current subscribers and a market cap of about 39 billion. That puts it in a pretty good perspective.

There is one item that might change things a bit. Apple has said that they are not going to treat the sales of Iphones as sales income when they are actually sold, but will treat them as a subscription income over 24 months., That will change the numbers that they report and may allow them to hide some of their numbers for a while. One should be able to backtrack and extract some rel numbers, but they may make it difficult if they don't release a detailed breakdown of the income. It doesn't affect the cash flow or actual income, it just delays the reporting of income somewhat, especially in the early months of iphone sales. Don't know how wall street will react.

to Financial guy (re: Linux guy); if he is in his twenties, he can afford to risk it all on Apple. He is at an age when risks like that bring the best rewards; I didn't start investing until I was 44, and AAPL helped me make up for all the lost time.

To Wingsy: Technically, you were right, which means that in about two weeks time, Apple will be the biggest computer company; I was referring to computer companies in a broader sense (not strictly hardware), which would include Oracle (already blew past them a few weeks ago - at $102B), SAP ($60B) and similar.

And, finally, to Kenc:

Apple's profit margins on iTunes are (hopefully) significantly higher than10%. Since they sell songs for $1, and collect only about $0.1 from each song, it would appear that the margin is 10%. In fact, this actually represents their share of the revenue. As far as profit is concerned, we would have to know how much Apple is spending for each download transaction on iTunes. If the cost of bandwidth, hosting, etc., is, let's say about 6 cents per transaction, then their profit margin is exactly 50% (9 cents).

Berkeley,
The significant information is the number of iPhones sold, and I assume that is the important number going forward. That, and the expected profit margins will determine the street's reaction to the iPhone.

Another area of concern could be iPod marketshare, since the iPod line has not been updated in a long time.

I'm so glad I kept my (most) of my Apple stock after the crash of '01. It's the only single stock I still own because I just couldn't bring myself to sell off. I just had a feeling that it would be alright in the long run. For once I was right about a stock and it has paid off nicely. My only regret is not buying more when I had the chance. I've been waiting for the next gen iPods and can't wait to trade up my trusty 3rd gen. I'd buy a Beatles iPod just to have it, and I already own all the good Beatles cdroms and albums.

Can someone say - $500 per share within the next 2 years. This stock is going up just like Google did.

I'd like to see another split. I'd buy more shares. But given that the stock is growing at just under 100% a year for the last 3 years or so, I think I'll just have to hold on tight for the ride.

Comment from: AJ
"I bought AAPL at the last split around $40/share. I whish I had more money then. All I can hope for now is a split--hopefully, a 4:1 split. "

Please explain AJ, how will a split have any affect your finances? I could understand it if all you have to invest is $40 or so. Then if AAPL has a 4:1 split right now you could buy another share. But, if you only have a lousy $40 to put in the stock market you are not in any position to be putting money in the stock market are you?

Even MDN is contributing to the confusion about when in 2008. The headline says "by 2008" but the article says "by the end of 2008"

I'm a shareholder as many of you are... If anyone has most of their net worth invested in apple (which I think is a good bet) please do the right thing to protect yourself and place a trailing stop order at about 10% below the currant price this way should something happen you won't be sorry.

By the way... if apple should suddenly drop 10% your position sells and you buy back in at a lower price and ride the wave back up!

I continue to be surprised by people who say a stock is cheap or expensive based on its share price. Every week I run into someone. Ooo, $132 is expensive! How the heck do they know?!

I only ever had one guy ask me what the P/E is.

I told him whatever figure they're looking at is conservative and I would cut it in half.

@Bob R.

"I'm a shareholder as many of you are... If anyone has most of their net worth invested in apple (which I think is a good bet) please do the right thing to protect yourself and place a trailing stop order at about 10% below the currant price this way should something happen you won't be sorry."

Another way to buy insurance is to buy covered put options. This costs more, but it is safer than stop orders.

I was the first. Now others are noticing. All the Analysts are talking about the exact thing I mentioned.
I was the first and they are stealing my insights without giving me any credit at all!