Apple Remains a King of the Hill

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Earlier this week, I received a great question from Kenneth on the Message Boards, so I’d like to take a moment and share it with you all:

After reading Jobs’ biography, it seems that without him, the driving force behind “cool” and “quality” might be gone. The fundamentals are good, but in tech, anyone can be overtaken by the next Jobs. Should I worry?

Thank you for your question, Kenneth. It’s difficult to picture it, but it has already been almost eight months since the untimely passing of Steve Jobs. As saddening as the news was for the Apple family and the tech world as a whole, Apple (NASDAQ:AAPL) has continued to progress under the legacy that Jobs left behind.

In less than a year, the company has launched the new iPad, complete with a retina display and an attractive $499 price tag, announced a whopping $10 billion stock buyback program and unveiled a historic dividend program that will start this September.

The stock has smashed through records, and the company topped ExxonMobil (NYSE:XOM) as the largest publicly-traded company in the world. In fact, the stock recently had the analyst community buzzing with projections that AAPL could reach $1,000 in the near future.

On the computer front, Apple’s biggest contender is Hewlett-Packard (NYSE:HPQ), which had to phase out its tablet business in a bid to restructure finances. And while Apple posted nearly 60% sales growth in the most recent quarter, Hewlett-Packard’s top-line shrunk by 3%. Additionally, Hewlett-Packard can’t even compare in terms of operating margin (11% vs. Apple’s 36%).

So no one can compare to Apple’s Mac computers, and its tablet business is still going strong. Apple sold over 35 million iPhones in the first quarter, 11.8 million iPads and 4 million Macs. Each of these products is enjoying booming sales growth. The only exception are iPods, which declined 15% year-over-year, but considering that the iPod makes up less than 5% of the company’s total business, I’m not worried about that.

While there may be some volatility leading up to the next product innovation or creation, I see Apple as a trillion-dollar company in the next three to four years and the only way to cash in is to buy shares now. And I think when earnings are released later this summer (tentatively scheduled for July 17), the company should get another boost.

Currently, the analyst community expects the company to grow sales by 31% and earnings by 32%. To put things into perspective, Hewlett-Packard’s earnings are forecast to drop 11%, and smartphone competitor Google (NASDAQ:GOOG) is only headed towards 17 earnings growth.

So, at this point, I really don’t think that there will be anyone that can overtake Apple and the legacy left behind by Jobs. But rest assured that I will keep close watch on any developments from this company and its competitors and I’ll let you know immediately if anything changes my recommendation for AAPL.


Article printed from InvestorPlace Media, https://investorplace.com/2012/06/apple-remains-a-king-of-the-hill-aapl-hpq-goog-xom/.

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