Apple Stock Undervalued & Potential Growth from a $900 MacBook
Today shares of Apple stock are on the rise as the Berstein Research Group elevated the Mac marker and made promising comments about Apple’s future as the company has long been rumored to release a lower priced MacBook. It has been predicted that if Apple were to release a $900 MacBook they would see a 50% increase in the broadness of their customer base.
Tony Sacconaghi, one of the Berstein analysts, calls Apple stock undervalued even in this economic crisis of sorts. Sacconaghi says "We believe that the stock is overly discounted, that Apple's short-term financials are likely to remain relatively healthy despite economic weakness, and that the company's longer term growth story remains intact."
One reason for the high expectations of Apple stock is the slow down in the PC market. If the PC market continues to remain flat in 2009, and Apple’s share only sees a 25% growth rate (low for the rate Apple’s share has been going), Apple would still see a 13% increase in Mac growth.
An even greater factor contributing to the high expectations of Apple Stock are the long standing and credible rumors that Apple is going to lower the price of its notebooks. As Sacconaghi puts it, “Perhaps most importantly, we expect Apple to lower price points to address a much broader market at some point over the next year."
A recent internal analysis indicates that if Apple were to release a $900 MacBook they would expand Apple’s addressable notebook market by 50% in terms of revenue and in units by as much as 67%.
This of course would pressure gross margins, but this has already been considered by the Berstein analysts. As Sacconaghi adds, "Given its extensive use of contract manufacturing, Apple's COGS (Cost of Goods Sold) are nearly entirely variable, and operating expenses relative to gross margins are low; the upshot is that Apple's earnings per share suffers less to a given revenue reduction than many of its peers."
Another factor that analysts look to in evaluating Apple stock is the potential of the iPhone. With iPod sales dwindling Apple has a “unique opportunity,” to convert loyal iPod fans all into iPhone users.