5 Reasons Why J.P. Morgan Still Likes Apple
Everything Apple does is subject to incredible levels of scrutiny, as the media, analysts, Wall Street, and fan-boys all pay attention to the latest and greatest from Cupertino. There are countless websites devoted to rumors about Apple, while hordes of media, developers and fanboys flock to the company's events.
From iPads to iPhones, iPods and Macs, Apple's product are everywhere. Just look at Apple's first quarter results when the tech giant earned $13.87 a share on revenue of $46.33 billion. Wall Street estimates weren't even close.
Apple's stock has had an incredible run year-to-date, gaining 27.5%, and 47.3% over the past twelve months, far outpacing the broader markets. Even with these outsized gains, the stock is relatively under-owned, compared to other stocks in the Russell 1000.
Here are the five reasons why J.P. Morgan is still incredibly bullish on Apple.
Apple is a sector unto itself
Apple has become so enormous in market cap ($480 billion and climbing), scope (nearly every company wants to be associated with Apple), and breadth (just look at the number of stories about Apple), J.P. Morgan argues the iPhone maker is a sector by itself. The investment bank rates Apple overweight with a $625 price target.
Even more impressive is that Apple would be the sixth-largest industry weighting in the S&P 500 , besting Insurance (3.4%), Food & Staples Retailing (3.1%), Diversified Financial Services (3.0%) and Media (2.8%). If it were a sector, Apple would be the eighth-largest, surpassing Materials (3.6%), Utilities (3.4%), and Telecom (2.6%).
J.P. Morgan makes note of Apple's importance on the index, as it helps add to equity-market gains. The investment bank explains that Apple has been the "#1 driver (out of 500 stocks) of the S&P 500's rally both since the October low and year to date, contributing 14 points to the rally since October (37% rise for Apple) and 11 points to the year to date rally (27% rise for Apple)."
The earnings story at Apple has been talked about for years. Just in the past two years (2010 to 2011), the company has grown yearly earnings from $15.15 per share to $27.68 per share, or nearly 82%. In the first quarter of 2012, Apple earned $13.87, or nearly half what it earned in all of 2011!
Apple's fiscal first quarter (fourth quarter calendar year) accounted for 3.5% of the 8% year-over-year earnings growth in the S&P 500. "In other words, 44% of the S&P 500's earnings growth in 4Q11 came from AAPL," the research note said. The next closest company to Apple is AIG(AIG) , which accounted for 1.0% of the earnings growth.