has taken a lot of flak on Wall Street in the last year. Slowly
but surely, however, the stock is making a comeback - and it may
only be the beginning of a longer rally for the world's largest
Apple shares have shot up 33% since dipping below $400 in late
June. The turnaround was long overdue. The stock had been in a
nine-month tailspin entering June, falling all the way from $700
last September. Now the stock has finally gotten out of its funk.
Apple's latest earnings are one of several reasons the stock has
plenty of room left to run.
The company reported earnings per share of $8.26 after hours
yesterday, beating analyst expectations by 4.2%. That's boosting
Apple shares by more than a percent in early trading today. It's
the fourth straight quarterly earnings beat for Apple after the
company had a couple a rare misses last year. If nothing else,
that gives the company its mojo back in the eyes of investors -
even if the earnings were down 8.6% from the same quarter a year
Over the long term, earnings growth will perhaps be the
biggest potential driver of Apple's stock. In the short term,
Carl Icahn may be more important.
The billionaire activist investor has been credited with
re-energizing Apple's stock in recent months. Icahn bought up
shares when the stock was trading below $400, and increased his
position by 22% earlier this month. Icahn now owns a whopping 4.7
million Apple shares, or 0.5% of the company.
Icahn's confidence in Apple is encouraging. What's more
important is his influence.
Icahn has been imploring Apple CEO Tim Cook to unlock some of
the company's massive $147 billion cash stockpile in the form of
a share buyback. Doing so, Icahn believes, would result in an
immediate 33% increase in Apple's earnings per share. Icahn's
recent investment in Apple was interpreted as a show of
confidence that Cook will listen to his buyback proposal. As a
result, some Wall Street analysts project that the stock will
above $600 by year's end
A third potential catalyst is the company's latest
. No, investors haven't been wowed by the new product yet, as
evidenced by the radio silence on Wall Street after last week's
iPad Air unveiling. The real question is: will consumers dig
Apple's latest iPad will be released this Friday, Nov. 1 -
just in time for the holidays. The lightest and fastest version
of an iPad yet, the iPad Air is sure to be a big seller the next
couple months. The question is how big. If Apple sells more units
this quarter than the 27 million analysts are expecting, that
should make for another strong quarter.
Earnings growth, a share buyback and new products are three
potential catalysts that could drive Apple's stock in the coming
months. But I doubt all three of them need to happen for Apple's
recent run to continue.
The stock is trading at just 12 times 2014 earnings. Even
after a 33% gain in four months, Apple shares still appear
undervalued. At such a depressed valuation, it won't take much to
convince more investors to jump back on the Apple bandwagon. All
it needs another push.
Any one of the aforementioned catalysts could be all the push
Apple needs to keep this rally going. If all three happen, then
$600 by year's end seems quite reachable.