has seen its market value more than double this year — making it one of
the best performers in the tech sector — in part owing to the hype
surrounding a product that the consumer-electronics icon has yet even
to announce.
Hopes are running high that Apple will soon lift the
wraps on a tablet-style mobile computing device. While the
always-secretive company has never confirmed that it is working on such
a device, the past few months have been replete with leaks about the
product’s design, capabilities, pricing and even name.
That has fueled a fresh run on the long-popular
stock. In a normally quiet trading period in late December, Apple
shares have jumped 10 percent. That after the stock had already doubled
in value from the start of the year, putting the company on track to
deliver one of the best performances among tech companies listed on the
“There’s no question that the recent stock activity has been based on more substantial talk about the tablet,” said
Munster and other analysts have said they expect the
speculative mania to continue until Apple announces the product. The
company has reportedly reserved meeting space in
for late January, and several analysts have reported discussions with
component suppliers who indicate that a launch of the device into the
market will likely take place in the first half of 2010.
But many points are still unclear, not the least of
which is its price. There is a question of whether the tablet, as a
mobile computing device, will earn a subsidy from wireless carriers
that would hope to use the device to sign customers up for long-term
contracts.
Also unclear is whether such a product would be
pitched as an expanded e-reader device to compete with such offerings
as the Kindle from
or marketed as a multimedia device allowing users to watch movies,
listen to music, and read along with communications applications such
as voice and e-mail.
“The question will be whether this device is
revolutionary or evolutionary,” Munster said. “The iPhone was
revolutionary, and the stock reflected that.”
Apple has, of course, been in a similar position before.
Before the company lifted the curtain on its iPhone in
the stock had run up by about 70 percent in the six months leading up
to the announcement, a time that also included heavy speculation in the
media about a wireless device under development at the company.
More notable is the fact that, after the device was
announced, the stock surged another 43 percent before the product went
on sale that summer. Apple closed that year with the stock near the
stock’s current valuation, to which it rebounded persuasively after
2008 losses. At a closing price of
Still, the stock trades at a sharp premium to its peers. Rival wireless-device makers
Apple currently trades at 27 times forecast earnings for the next four quarters.
per share is backed out. He said the stock has an ex-cash valuation of
16.6 times earnings estimates for 2010, compared with 17.2 for its
IT-hardware peer group.
“We believe that Apple shares still present an
attractive valuation ex-cash,” Reid wrote in a report Monday, in which
he raised his price target to
The absence of any announcement from Apple hasn’t kept analysts from laying out projections for tablet sales in 2010.
Munster of
“My model assumes only
share in earnings (from the tablet), which is 1 percent of my number
for the company,” Marshall said in an interview Tuesday. “That’s
conservative.”
The Broadpoint AmTech analyst said the success of
the Kindle for Amazon gives a good indication of the potential for a
higher-functioning media device. “Clearly, people underestimated the
size of the e-reader market,” he said. “The market expects the tablet
to be like an e-reader on steroids, a media device with limited Mac
functionality. And there is a high likelihood that it will be
subsidized by wireless carriers.”
Given the run-up that Apple’s shares saw following
the market launch of the iPhone, Marshall said the stock still has
plenty of headroom at its current level. “A price of
Munster said the tablet is not a factor in his
price target for Apple, though he said conversations with component
suppliers and other contacts have given him “90 percent confidence”
that such a product is, in fact, coming. Details of the device’s
capacities will be very important, he said.
“The question is, will this device change some of
the historical boundaries around publishing on the Web that might
create a new business model for publishers?” he said. “You could argue
that the iPod saved the music industry. Could the tablet do the same
thing for the publishing industry?”
He said the stock would likely be volatile for a
time after a product announcement — till market-adoption patterns and
levels become clear. “There’s going to be a sobering reality to hit
after the news sometime,” Munster said. “That’s why it’s not in our
price target right now.”
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