A routine Apple stock story in today's Globe "The Street" column:
Commentators spouting off about the beleaguered American consumer should take a gander at Apple. Its recent move to sell the iPhone through Verizon is providing a nice tailwind as its iPad 2 cannibalizes PC sales from the likes of Hewlett-Packard. The one unit receiving little attention, despite outstanding growth, is the Mac business, which is stealing market share at a steady clip. Two other positives: Apple’s stock is extremely cheap, on a peer and historical basis, and it carries nearly $66-billion of net cash (cash minus debt). Morningstar’s thesis: Apple is a safe, cheap growth stock, likely to outperform.
Morningstar has a fair-value target of $475 on the stock, suggesting a return of close to 50 per cent. Unlike the sell-side, Morningstar doesn’t link its targets to a specific time frame.
cannibalize, v. When a new product steals market share from the same company's existing product(s). Not when a new product steals market share from another company - that is, Apple taking market share from rival H-P.
return, n. Net gain or loss on an investment, including dividends and trading and other fees. Not the increase or decrease in the value of an investment during the entire time it is held. In the statement above, the author means a 50% jump in the Apple stock price, but is saying a 50% return on investment (ROI), two entirely different things.
Also, when an analyst puts a "target" on a stock, careful to see if he or she has specified a target date. That is a common analyst ruse. He or she can bravely say Apple will jump 50%. But by failing to say in what period of time the rise will occur, the prediction will be meaningless unless you're prepared to wait 5 or 17 years for the stock to make that 50% increase.
The rough equivalent to this are the elderly Florida drivers whom, Jerry Seinfeld observes, have their left-turn signal blinking for seven miles. That would be your "eventual left" signal, says Seinfeld.