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The magic of Apple Add to ...

Eddy Elfenbein at Crossing Wall Street has done some interesting math on Apple Inc. , which is bound to make non-investors or late-comers to the stock green with envy. The stock has risen about 60-fold over the past eight years, which means that the stock has, on average, doubled every 17 months.

"If you had bought Apple 13 years ago, you'd now be making all of your money back every three months," Mr. Elfenbein said. "That means the company made more money in the quarter than the entire company was worth in 1998."

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He seems to be referring the company's earnings here. In its quarterly financial results released on Tuesday, after markets closed, Apple reported net earnings of $7.79 (U.S.) a share or about equal to the share price in 1998 - pre-iPod, pre-iPhone and pre-iPad.

The share price hit a new record high on Wednesday, passing $396. Despite Apple's enormous success, the shares continue to look remarkably reasonable next to earnings. They trade at just 15.4-times trailing earnings, versus a six-year average of 27-times earnings, suggesting that investors don't have a whole lot of faith that the company can maintain its tremendous growth trajectory.

Even analysts have been shown to be a touch too conservative-minded on the stock, with earnings estimates that been shy of the mark. Now, though, many of them are warming up to the possibility that the stock could pass the $500-mark within 12 months, with a number of Wall Street and Bay Street number crunchers boosting their price targets in light of Tuesday's quarterly report.

Here are a few examples from Bloomberg: Morgan Keegan raised its target price on the stock to $544 from $480; Bank of Montreal moved to $450 from $420; Goldman Sachs raised its target to $525 from $485; and Deutsche Bank and Royal Bank of Canada both raised their targets to $500 from $450.

 

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