Shares of Apple (Nasdaq: AAPL), the world's most valuable technology company, have recovered lost ground and are trading not much below their record high of $644 set on April 10. Despite a setback when Apple's third-quarter earnings fell shy of estimates last month, they could set another record again this week.
Apple closed Monday at $630, up $8.30 or 1.3 percent, giving the Cupertino, Calif., MacBook, iPod, iPhone, iPad, iTunes and iCloud developer a market capitalization of $590.6 billion. By comparison, the market value of the No. 2 most valued company, ExxonMobil (NYSE: XOM), of Irving, Tex., is $406.5 billion.
Given that several analysts have issued target prices for Apple at $1,111 a share, the recent moves look justified, especially because the market and industry analysts expect major product rollouts next month for fourth-quarter shipments.
Analysts like Peter Misek of Jefferies and Gene Munster of Piper Jaffray, who keep tabs on the company as well as its top suppliers and contractors such as South Korea's Samsung Electronics (Seoul: 005930) and Taiwan's Hai Hon Precision Industry (Taipei: 2317), also known as Foxconn, believe significant upgrades to the iPhone 4S, as well as the MacBook line, could be formally introduced next month.
So, too, could the long-anticipated Apple TV, which CEO Tim Cook has sometimes discussed. Apple, maintaining its usual policy on products, has not commented on new products or timing.
But there must be reasons why analysts expect an enormous surge in Apple's first-quarter performance (corresponding to the fourth calendar quarter) besides the holiday buying season. New products and continued new demand, especially from customers in China, where Apple is expected to make new iPhones available to more mobile subscribers than ever, is expected to generate a sales explosion.
Analysts surveyed by Thomson Reuters expect Apple's fourth-quarter revenue for the period ending in September to jump 24 percent to $34.96 billion, with net income of $8 billion, or $8.45 a share, from last year's $28.27 billion, with net income of $6.2 billion, or $7.05 a share.
But consider the blowout they expect for the period ending in December: Revenue is expected to skyrocket to $54.77 billion, with net income of $14.53 billion, or $15.31 a share, from $46.11 billion, with net income of $13.06 billion, or $13.87 a share, in the same quarter of 2011.
That's a 57 percent leap in revenue in a single quarter, clearly expected for whatever new products Apple introduces, such as an iPhone 5, iPad Mini or hybrid devices.
So with a price-earnings ratio of 14.81 as of Monday's close, Apple shares are priced cheaper than those of arch-rival Google (Nasdaq: GOOG), the No. 1 search engine, with a P/E of 19.57 and only slightly above those of Intel (Nasdaq: INTC), the No. 1 chipmaker, with a P/E of 11.30.
Of course, 50 weeks into Cook's tenure as CEO, investors can't be sure that the dynamic spark of late co-founder and former Chairman Steve Jobs will persevere. But investors this week are clearly gambling in the affirmative.