SAN FRANCISCO - JANUARY 27:  Apple Inc. CEO St...
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Consumers love Apple: Apple-crazed shoppers sent the Cupertino, Calif.-based iPhone maker’s net income for the quarter ending in March up 95% over the year-ago period. Investors don’t: Apple’s shares are up just 4.1% year-to date, and Apple trades at a price-earnings ratio of just 16. Yum, the company behind Taco Bell, trades at a PE ratio of 22.
What’s up with that? A team of CreditSuisse analysts spent eight weeks trying to figure it out, talking with more than 150 institutional investors, according to a note investors Monday. Nothing they heard convinced them to change their “outperform” rating, or price target of $500 on the company’s shares. Here are their responses to what institutional investors are saying about Apple:
  • The iPad is great, but how many tablets can Apple really sell? Lots, Credit Suisse’s analysts argue. “we remain of the view that the tablet market will rise to 300mn units and Apple can retain 50% market share at least.”
  • The iPhone is popular, but how long can the high-priced handset keep selling? Credit Suisse’s analysts argue the addition of more carriers and the ongoing growth of the smartphone segment mean growth will continue for a while. “Even with the existing high-end focus, Apple can see smartphone volumes rise to 85mn/120mn in CY11/CY12.”
  • Apple’s just too big: the bigger you are, the harder it is to grow at the a rate growth investors want. Apple’s shares account for 2.6% of the value of the S&P 500. Apple shares, however, remain cheap, Credit Suisse’s analysts write. “In addition, Apple’s current strategy simultaneously addresses several areas of consumer spend (telecoms, PCs and CE), making its opportunity set unique and significant,” they add.
  • Steve Jobs: Apple’s Chief Executive and founder is on medical leave. Will he return to the company he founded? Credit Suisse points to Apple’s “deep bench” of managers.
  • Cash: Apple has more than $66 billion in cash and securities. Okay, I’m not going to even try to explain why this is a problem. Think you can? Go for it in the comments.

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