The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
The battle between iBulls and iBears over the direction of Apple's stock has been fascinating to watch this year.
For most of 2013, the animals of the more ursine variety were trouncing their taurine rivals. But the tables have turned.
Apple (AAPL) shares have enjoyed a stellar rally over the past few months, surging nearly 50% from the 52-week lows they hit back in April. Amazingly enough, Apple's stock is now up 6% year-to-date.
The Apple bulls have several reasons to feel vindicated.
And despite the big jump in the stock over the past few months, it's still cheap. And legitimately cheap. Not cheap in an iPhone-5C-is-cheap-just-because-it's-not-as-pricey-as-the-5s kind of way. The stock trades for just 13 times fiscal 2014 earnings estimates.
To put that in perspective, Apple is trading at discount to Microsoft (MSFT), which is valued at nearly 15 times fiscal 2014 profit forecasts. Call me crazy. But doesn't Microsoft's future look a lot cloudier than Apple's?
Apple does seem to have momentum on its side again. Sales of the latest iPads are expected to be strong during the crucial holiday shopping season. And analysts have been busy raising their earnings forecasts for the current quarter and fiscal year as a result.
According to data from FactSet Research, the consensus earnings estimate for Apple's fiscal first quarter (which ends in December) is now $14 a share. At the end of August, analysts were expecting a profit of just $13.41 a share. For the full year, Wall Street expects Apple to earn $43.38 a share -- up from a consensus of $42.44 in August.
And those numbers may be too low. If you look at Estimize, a site that crowdsources estimates from a wider array of investors that includes traders and institutional money managers, the consensus estimates for the first quarter and all of 2014 are $14.55 a share and $44.66 a share, respectively.
What's more, Carl Icahn (love him or hate him) has clearly put a floor on the stock. Shares of Apple are up more than 20% since the activist shareholder first tweeted on August 13 that his Icahn Enterprises (IEP) firm has a "large position" in Apple and that he thought the stock was "extremely undervalued."
As the chart below shows, Apple's performance has trounced the Nasdaq's (and it hasn't exactly been a slouch) over the past four months or so.
Now Icahn may not convince Apple CEO Tim Cook to raise its dividend or increase its stock buyback program. Then again, Apple does have $146.8 billion in cash burning in its iPocket, so why not throw Icahn and other shareholders a bone?
Even when you account for the fact that much of Apple's cash is parked overseas for tax reasons, this is a company that can clearly afford to boost its quarterly payout, buy back more stock and still have plenty left over for investing in the company's future through acquisitions, capital expenditures and research and development.
Which brings me to my final point. If Apple is ever going to get back to the all-time high above $700 a share that it set in September 2012 shortly after the launch of the iPhone 5, it's not going to do it just through share repurchases and dividends.
For Apple to do that, it probably will need to prove to some skeptical investors that it has another new product category or two up its sleeve. The big knock on Apple for most of 2013 has been that it is no longer innovating. It is merely spitting out updates of iPhones and iPads every year or so.
But that perception can change.
Just look at Google (GOOG). A few years ago, it was facing some of the same challenges and questions that are currently dogging Apple.
Investors erroneously thought that Google's best days were behind it because the company was apparently a one-trick pony (search) that was starting to lose relevance in the social media revolution being led by Facebook (FB) and Twitter (TWTR).
But Google invested heavily in mobile. And now its Android operating system has supplanted Apple's iOS as a market share leader. Google has also done a great job expanding into video advertising with YouTube and continues to dominate search. That one-trick pony has turned out to be a Man O' War.
Add that up and Google is trading near its all-time high. I pointed out last week that Google could soon pass Exxon Mobil (XOM) in market cap. If it does that, Google would be the second most valuable company in the U.S. -- trailing only Apple.
So can Apple pull a Google? I see no reason why it can't. It's hard to believe that Apple has nothing new in development. Rumors have run rampant for years (even before Steve Jobs passed away in 2011) about Apple looking to disrupt the living room with an iTV. We're still waiting for the mythical iBoobTube though.
There has been chatter about Apple jumping aboard the wearable tech craze. An iWatch perhaps? There's been speculation that Apple could be working on an iCar. One analyst has even suggested that Apple should buy electric carmaker Tesla (TSLA).
That may be overly ambitious. But you'd have to think that Apple has something that could be the next proverbial big thing.
Now all Apple has to do is bring it to market. Considering that the company hasn't introduced a new product line since the iPad in 2010 -- following the first iPhone in 2007 and first iPod in 2001 -- the company seems overdue for a splashy product launch.
And if that happens in 2014, then Apple's stock could easily climb back above $700. After all, it's now less than 20% below its record high.
The bear market in Apple's stock is over.
Cue the Apple "iCahn" jokes. Apple's stock topped the $500 mark Wednesday for the first time since January. Shares moved higher for a second day on the news that activist investor Carl Icahn has taken a "large" position in the company.
Shares crossed the psychologically important level and climbed as high as $504.25 in afternoon trading, before settling just below the mark at $498.50.
Still, the recent gains have boosted Apple's value by MOREHibah Yousuf - Aug 14, 2013 4:10 PM ET
Carl Icahn has yet to sell even just one share of his stake in Netflix, and for good reason: the stock is currently trading at a three-year high and may soon be on its way to an all time-high.
While shares of the usual high-flier bounced around the breakeven line Thursday, they've been having quite the run.
Shares of Netflix (NFLX) have rallied 10% over the past five days, and have nearly MOREHibah Yousuf - Jul 18, 2013 2:41 PM ET
You're doing better Sony (SNE), but not good enough... yet.
That's the latest message from Dan Loeb, the firebrand hedge fund manager known for vociferously agitating for changes at some of the world's largest tech firms.
In a sign of "increased confidence," Loeb's Third Point hedge fund increased its stake in Sony to 70 million shares, or roughly 7%, from 6% in May.
Related: Hedge fund targets Sony for spin-off
At least part of MOREMaureen Farrell - Jun 18, 2013 2:36 PM ET
Paul R. La Monica - May 1, 2013 1:04 PM ET
Seven years ago, activist investor Carl Icahn spelled out a blueprint for breaking up media conglomerate Time Warner (TWX) into four separate entities.
With this week's decision by CNNMoney's parent company to spin off Time Inc., Icahn's prediction is finally coming true. But he won't be able capitalize on it. By late 2008, Icahn had completely sold his stake.
In 2006, Icahn pushed for Time Warner to essentially split itself into MOREMaureen Farrell - Mar 8, 2013 2:09 PM ET
Chesapeake Energy (CHK) announced a deal Monday to sell half of its oil and gas assets in northern Oklahoma to Sinopec, one of China's largest oil producers, for $1 billion.
Chesapeake's shares dropped nearly 5% as investors worried that the embattled Oklahoma City gas company sold the assets at a discount.
"There's been a concern that Chesapeake's weakened financial position would make them do deals at low prices," said Phil Weiss, an analyst MOREMaureen Farrell - Feb 25, 2013 11:39 AM ET
Shares of Herbalife (HLF) bounce back from a sharp drop Monday morning after the New York Post reported that the company is the subject of a federal investigation. Herbalife's stock fell nearly 13% shortly after the open but finished the day up more than 1%.
The investigation was revealed after the Federal Trade Commission disclosed a list of 192 complaints against Herbalife from the past seven years in response to a Freedom of Information Law request MOREHibah Yousuf - Feb 4, 2013 4:01 PM ET
Super Carl? Activist Carl Icahn has been racking up some pretty big wins in the past few weeks. Now, add Chesapeake Energy (CHK) to that list.
Chesapeake Energy's stock is up more than 6% Wednesday, following the company's announcement that its controversial CEO and founder Aubrey McClendon would step down immediately and retire on April 1, 2013.
Icahn was a key force behind McClendon's ouster. Early last year, investors discovered that MOREMaureen Farrell - Jan 30, 2013 12:43 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
My first reaction upon hearing the rumor Monday about Carl Icahn supposedly considering a stake in Hewlett-Packard was this: What took him so long?
HP (HPQ) has been a slow-motion train wreck for a while now. Shares MOREPaul R. La Monica - Dec 11, 2012 12:35 PM ET
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