AAPL: To Buy and To Hold

Apple Inc (AAPL) shares have hit an all-time high of $600.01/ share (before closing for the day at $585.56/ share), giving the company a $545 billion valuation, making it the largest company in the world in terms of market capitalization. This happened right after the first batch of “the new iPad” was sold in Australia (from telecom company Telstra’s stores); soon to be followed by sales in Japan, Germany and the US, from retailers like WalMart, Best Buy & Radio Shack apart from Apple’s own Apple Stores.

The company shares reached $500/ share only a month back and the share price has jumped 44% this year alone.

Apple could be valued even higher, according to Morgan Stanley Analyst Ms. Kathryn Huberty, who revised her target price from $515 to $720, predicting that the company would go to $960 (or higher) on a $80 Earnings Per Share (EPS) in 2013. This is based on a Price-Earning Ratio (P/E) of 12, which is at the lower end of Apple’s historical forward P/E (currently at approx. 17). Morgan Stanley is not the only firm revising their prices upwards, earlier Piper Jaffray and recently OppenheimerUBS also have revised their target prices for AAPL. I am sure, others institutions will soon follow suit. IF Ms. Huberty’s price predictions for 2013 come true, that would give Apple Inc. a market valuation to the tune of a mythical $1 trillion!

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Publicly Quitting Goldman Sachs: Uproar on Wall Street

Wall Street is in a whirlwind after disgruntled Goldman Sachs executive, Greg Smith, tendered his resignation via the op-ed pages of the New York Times, and in the process, publicly blasted Goldman for betraying its historic culture and putting profits ahead of client interests.

Mr. Smith described himself as an executive director and head of Goldman’s US equity derivatives business in Europe, the Middle East and Africa. According to him, ” the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.” He further adds, “Goldman Sachs today has become too much about shortcuts and not enough about achievement.”

Goldman Sachs wasted no time in rejecting Mr. Smith’s claims. “We disagree with the views expressed, which we don’t think reflect the way we run our business,” a Goldman spokeswoman said. She added, “in our view, we will only be successful if our clients are successful.  This fundamental truth lies at the heart of how we conduct ourselves.” Moreover, Mr. Smith’s position was identified as vice president, a relatively junior position held by thousands of Goldman employees around the world.

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Euro-Zone Bail-out: Media & Market Reactions

Greece has been bailed out. A number of steps have been initiated by the leaders in Europe. A modicum of stability has returned to the Euro-zone financial (and political) system.

Specific to Greece, euro-zone official lenders’ debts have been restructured in the forms of lowering interest rates from 5.5% to approx. 3.5% and extension of term from7.5 years to 15 or even 30 years. These have been backed by €109 billion bail-out money, an additional €20 billion for Greek bond buyback and €35 billion ECB collateral for Greek banks. Private creditors, officially recognized as Private-Sector Involvement (PSI) have been given a choice of either of three options – rollover of maturing bonds, swap with longer maturities (both backed by AAA  -rated collateral) or secondary market bond buybacks. However, the PSI has been defined to include only ‘voluntary’ and ‘substantial’ creditors, which would lead to a number of lenders being short-changed.

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Stress Tests in Distress

A nice little write-up on banks in Europe and flawed stress tests. The methodologies should be looked into, improved upon and then applied to banks in Bangladesh. Better clues to the current liquidity crisis would be revealed and a more detailed picture would emerge.

“Ignoring the Obvious” from The Economist