Taking Stock of Apple: Share Prices Too Much?

The price shares for Apple’s stock continue to climb steadily this week, causing some to wonder if an investment is really worth the price.
Gene Koprowski posts on MacNewsWorld, that the primary reason that share prices continue to climb is the potency of the iPod/iTunes combination.

“Wall Street investment bank Bear Stearns in a research note last week predicted that sales of iPods will reach 10.5 million units during the second quarter. Though some have pulled back on estimates, Bear Stearns analyst Andrew Neff, who wrote the report, believes that iPod sales will beat Wall Street’s consensus estimate of 9.5 million units sold this quarter.”

According to Neff, Apple’s earnings per share will be US$2.25 for the fiscal year ending in September, and the stock’s target price is $100 per share. The price at midday on Tuesday was $67.73.

Koprowski also interviewed Jason Tillberg, who heads the paper asset division at investment group New York City Cash Flow. “The market cap of Apple is a little over $58 billion now and that’s a heavy premium to a company that has only a little over $8 billion in net tangible assets ... and estimated 2006 earnings of $1.690 billion, per the Value Line Investment Survey,” said Tillberg.

“The Cupertino, Calif.-based company, has, to be sure, had a great run in its share price, from as low as $6.40 per share to just under $70 today, he said. ‘The growth story from Apple is fantastic, but investors’ earnings expectations are too high and investors would simply be overpaying for growth in my opinion,’ said Tillberg. ‘It’s a terrific business that I’d love to own—but just not at this price.’”

Apple sales might also rise because of Apple’s plan to enable Windows users to load their operating system on Mac computers. There is room for growth in that realm. And with the number of iPod uses growing by the day, Apple is expanding beyond the music and the PC functions.
Koprowski also reported that third party developers are also accelerating their initiatives with Apple, raising the interest of Wall Street.
“Coinstar this week, for instance, announced that users who have spare change in their pockets can use coin counting machines owned by the company to obtain eCertificates to use to purchase songs from iTunes to download onto their iPods—with no fee for the coin counting.”
These expert predictions arrive on the heels of an April 7 two percent drop in the share price of Apple stock. Bank of America cut its price target on the stock, citing Apple’s lower forecasts for iPod and Mac sales.

“The brokerage said in a report that sales of the iPod digital music player will remain strong, but with a slightly less sustainable growth rate, and that Apple’s market share gains in personal computers will be less than it had expected. Before Friday’s decline, shares of Apple had gained 15 percent in the last two days after the company announced early Wednesday that it would make available free software that would allow Microsoft Corp.‘s