Apple: New iPhone, new upside target

by Geoffrey Seiler, editor BullMarket.com

We've being saying for quite awhile that we thought there was a lot of pent-up demand for a 4G (LTE) iPhone from Apple (AAPL), and the record sales numbers for the iPhone 5 point to that indeed being the case.

Apple's reign as the greatest company of our generation may not last forever, but right now it is an inexpensive stock ahead of the biggest product launch in its history.

The company announced that pre-orders for the smartphone topped two million units within the first 24 hours it went on sale. That's more than double the previous record held by the IPhone 4S.

Some analysts were already upping their forecasts, including Canaccord analyst T. Michael Walkley, who wrote: "Given the record pre-orders, we believe Apple could ship 9M to 10M iPhone 5 models by September 29, or the last day of F2012, versus our initial 6M estimate."

He adds. "We are increasing our F2012 EPS estimate from $43.25 to $44.32 and our F2013 estimate from $56.90 to $56.96."

That 9-10 million unit forecast is at the high-end of what Piper Jaffray's Gene Munster predicted before the weekend when he wrote: "We view the iPhone 5 as the Rolex of smartphones in terms of quality and build, while the majority of other phones are dominated by lesser quality plastic and feel more like Timexes. Why would someone by a Timex when they can have a Rolex for the same price?"

Even if it isn't able to develop a new game-changing product in the next couple of years, it's still riding a strong secular smartphone growth cycle, while the tablet market is still in its infancy.

That combined with the stickiness of the Apple connectivity universe, product extensions such as an iPad mini, and gaining a bigger presence in emerging markets like China should be enough to sustain solid growth for years to come.

We also wouldn't underestimate the chances of the company coming up with another must-have tech gadget.

Excluding its more than $125 per share in net cash, Apple still only trades at less than 11x next fiscal year's EPS consensus of $52.89, despite its continued strong growth prospects.

The company is also projected to generate more than $53 per share in free cash flow a year moving forward, good for an EV/FCF yield of 9%.

Despite its huge gains (more than 1,000% in its two stints on the Recommended List), we still rate the stock a "Buy" and upped our target to $875.

Learn more about this financial newsletter at Geoffrey Seiler's BullMarket.com.

Related articles:

• F5 Networks: High quality tech on sale
• In the chips with Taiwan Semi
• Qualcomm: Printing profits
• Triple Crown Techs: Growth, value, yield