How Apple gets to $350 by the end of the year redux

Re·dux /rēˈdəks/ Adjective: Brought back; revived: “the 1980s were more than the 50’s redux”.

This one billionaire friend of mine made most of his money by selling a big .com to a big tech company at the peak in 2000 and before that had taken a semiconductor company that he founded public. Brilliant guy to say the least. I once stayed at his guest house on his estate in Santa Barbara and got to pepper him with questions and learn about how he’s made his money.

A few years ago, in September 2008, he’d sent me an email telling me:

My portfolio has gotten trashed this last year too. My private equity holdings are struggling, my portfolio is off 16% and I’m ready to say I’m outta here. Actually, I am outta here in another two weeks for another month in the south pacific. No ticker tapes, no bad news, no politician lies, no memory of government bailouts…….trust me its all good.

The financial world is making a few swirls around the toilet so I’m just going to crawl out on the rim and escape for awhile. Keep on calling it like you see it.

Cody back here in real-time. I even talked about him and why he was leaving on my Fox Business show as I was explaining why I was still so bearish in September 2008 despite the markets being down 30% from their highs (they eventually fell another 40% from the levels you see at the bottom of the screen in the clip):

Fox Happy Hour Cody’s Big 3: Salaries, Bearish, and Bailing

He sent me another very interesting email this weekend talking about Apple and how I had been so confident about it geting to $350(!!) a share by the end of the year…in 2010, back when the stock was at $250. He forwarded me an old article I had written with few highlights clipped out of it, saying simply:


Just going through my old emails and eliminating stuff that I had archived. I just wish I would have been more convinced about your prognosis. ( We can all say that in retrospect, right? )

Hope all is going well in your life!

Why Apple’s headed to $350 by year end
September 2, 2010, 12:07 PM
By Cody Willard

He’d pulled out the following quotes from the article:

Most Apple investors these days will tell you what their cost basis is as a matter of pride.  And why not?  It takes guts to buy a stock and own it and have the faith that management can execute in a hungry, eternally creatively destructive marketplace and then have the patience to let the stock go higher over time.  Not to mention, you’ve also got to have faith in the US economy/stock market and we might as well throw in there that any stockholder also must believe that accounting standards in the US make enough sense and have enough transparency and that the markets are indeed paying some multiple of real, sustainable cash flows from whatever business they own stock in, and so on and so forth…

So yeah, why shouldn’t Apple shareholders be proud?   They bet and they’ve been winning.  Big.  Well, the reason I bring all this up, isn’t just for some two-cent investment psychology lesson (though, I’ll tell you right now that I’m personally still willing to pick up two pennies off the ground, when I see ‘em.  Money’s money, baby!).  But I bring this up because I think, if you don’t own it already Apple, you probably want to go ahead and establish your cost basis at these current levels.  Because this stock is going higher.  Much higher.  Probably to at least $350 per share before year end.  And Apple’s gonna hit $1000 before 2015.    So wouldn’t you like to look back when it does and proudly tell people your own cost basis?   Let’s dig into the fundies and market and see why I’m pounding the table once again on my old friend AAPL.

Cody back again in real-time. Well, I can’t quite say I’m pounding the table on my old friend AAPL, even as it remains one of my largest positions. I do think Apple will hit $1000 before 2015, in fact, as I announced to the crowd at last month’s Apple Investment Summit, I think it’ll get there sometime in 2013. But that doesn’t mean I’d be chasing it right now — I like to buy weakness, as I was doing back when I wrote that article, and I figure Apple will indeed have some near-term weakness again at some point, as all stocks do at times, even if just to wash out the recent weakhanded longs. Back then, the stock had just fallen from the high $200s to:

The stock’s still cheap, yes, even at $250 per share.  And yes, even though it’s up from $7 just eight short years ago.  That’s because of good ol’ fashioned earnings again.  The stock’s only trading at 14 forward P/E multiple.  And when you take into account all that cash, it’s only a 12 price to enterprise value multiple.   This, for a company growing earnings 20-30% per year and positioned to keep doing so for a decade.

Amazing, but Apple’s trading at just about those same P/E and enterprise value multiples, despite the stock having gone from $250 to $600 since I wrote that article. Regardless, my main point out of all of this is that I’d rather be buying some of Apple’s suppliers right now than Apple itself.

I like Broadcom and Qualcomm but I haven’t pulled the trigger on those two just yet. I am long a couple Apple suppliers, including Level 3.

Back in a bit with more on the markets and earnings and all that stuff.