Apple’s newest iPad will hit retail outlets and the mailboxes of customers today, while the company’s stock may join in the festivities by closing above $600 a share for the first time. Since last week’s introduction of the new device, the stock price has soared and analysts polled by StarMine have become significantly more bullish on the company’s outlook.
Analysts polled by StarMine have become more bullish on Apple since the new iPad launch. Over the past few days, analysts have begun to boost their estimates for the company’s first-quarter earnings to a level north of $10, well above the current mean of $9.54 a share. For instance, Peter Misek, an analyst with Jefferies & Co., who has a five-star rating from StarMine for the accuracy and timeliness of his forecasts, now expects Apple to earn $10.72 a share in the first quarter, thanks to the contribution of the new iPad, up from a previous forecast of $9.51 a share. And even after the stock’s dramatic price gains in recent weeks – it is up 17.8% in the last 30 days – the StarMine Intrinsic Value model suggests that it is still dramatically underpriced at yesterday’s close of about $585 a share. Instead, the model indicates that it should be trading at a level closer to $700 a share.
EXHIBIT 1. APPLE INTRINSIC VALUE
Source: StarMine Professional.
Apple’s newest tablet offers consumers a much improved screen, as well as 4G capability. The tradeoff is size and weight: the latest addition to the Apple lineup is slightly thicker and heavier than the iPad 2. Oddly enough, analysts aren’t worried that the latter points will deter consumers; the biggest fear seems to be whether Apple can meet the super-heated demand for the device; most conclude by agreeing that Apple can lay its hands on the necessary components.
True, Android-based products are snapping at the heels of the new tablet as well as Apple’s other products, and there’s the risk that competition will ignite a pricing war. But so far, betting against Apple’s ability to stay ahead of its rivals has been largely unsuccessful – and analysts believe consumers will be offered the opportunity to upgrade their smartphones yet again when Apple announces an iPhone 5, with superior features.
For more on analysts’ changing views of Apple on the eve of the launch of the newest iPad, please watch this interview with analyst Jharonne Martis.
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