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Is Apple Inc. (AAPL) Stock Really Worth $150?

By U.S. News & World Report

Goldman Sachs (ticker: GS) gave Apple Inc. ( AAPL) shareholders an early Valentine’s Day present on Monday, raising its price target to from $133 to $150 per share. Naturally, AAPL stock responded well to the news; shares rose about 1 percent in response to the praise, hitting 52-week highs in the process.

The $150 level represents a 13.5 percent increase from Friday’s closing price of $132.12.

The question is: How realistic is Goldman’s $150 price target?

[Read: The 10 Most Anticipated IPOs of 2017.]

Don’t count Apple out. Apple is coming off a blowout quarter, one that beat nearly all analyst expectations and sent AAPL stock skyrocketing. Shares jumped 6 percent following the fiscal first-quarter results.

A big part of what made Apple’s first quarter numbers so good were the shockingly good iPhone sales numbers, which analysts expected to be very muted following a string of disappointing results in the quarters preceding it.

Point being: just when you count AAPL out, the company shows it still has a trick or two up its sleeve. And if Goldman’s right, Apple’s greatest tricks are yet to come.

Goldman’s thesis. The bottom line is that Goldman expects big things from the iPhone, the 2007 invention that quickly became Apple’s best-selling product, transformed the business, and turned it into the most valuable company in the world.

Last quarter alone, AAPL sold over $54 billion worth of iPhones, setting a company record and accounting for nearly 70 percent of Apple’s overall sales.

But Goldman expects the iPhone 8 to be a major improvement from the iPhone 7, seeing as this will be the 10-year anniversary of the first model.

Apple has been roundly criticized for not making meaningful changes from one iPhone model to the next, but this time, the tech community will be expecting something big.

“The iPhone7 didn’t offer the upgrade that many consumers were looking for, but the next model is rumored to be packed with several new features. I am not sure about $150 as Goldman Sachs suggests, but extending to $143, Bloomberg’s 12-month consensus target price might not quite as far fetched,” says Chris Kim, senior vice president and chief investment officer at Tompkins Financial Advisors, based in White Plains, New York.

Goldman specifically expects the iPhone 8 to come with a “3D sensing functionality” that would “enable a robust augmented reality feature set that we believe will be a key differentiator.” Apple insiders have hinted before at AR and virtual reality would be major points of focus for AAPL going forward, and following the huge success of games like Pokemon Go in 2016, any iOS or phone manufacturer that makes AR easy to develop for and play with has the potential to be richly rewarded.

Not only that, but Goldman thinks the iPhone 8 will have an OLED display, allowing for the removal of the home button entirely. Some have suggested the iPhone 8 will be the first iPhone with the ability to charge wirelessly as well, would be a huge step forward.

“The phone is speculated to have some nice features that are more function than form, which tends to draw in more upgraders than normal,” says Peter Karazeris, an analyst with Thrivent Financial in Minnesota.

Last and perhaps most importantly, Goldman expects the iPhone 8 to have three SKUs: the current 4.7″ model, the current 5.5″ model, and the yet-to-be-released 5.8″ model.

The reason this additional 5.8″ model would be so great for AAPL, as you might have guessed, is because it’d be more expensive than the other two, raising the average selling price for all iPhones sold and boosting the top line.

Currently the 4.7″ model goes for $649 and the 5.5″ model goes for $769, so seeing an average selling price at or near $800 a pop for the largest model seems quite reasonable.

But Goldman needs more than just chatter about the long-anticipated 10th iPhone anniversary to justify its $150 price target for AAPL stock.

The Wall Street bank does that by raising its projected iPhone sales for 2017 from 227.3 million phones to 230 million. For 2018, it increased its forecast from 231.5 million phones to 235.9 million.

[Read: 5 Reasons Donald Trump’s Presidency Will Include a Recession.]

More importantly, Goldman is raising the earnings multiple it believes AAPL stock deserves from 14 to 16, making each dollar of earnings worth 14.3 percent more than it used to. Earnings multiples usually rise when greater growth is expected from a company in the coming years than there was previously, so a slight boost in Apple’s multiple makes sense.

The consensus earnings per share estimate seen by most Apple analysts on the Street calls for $8.95 in fiscal 2017; multiply that by 16, and you get a price target of $143.20. Goldman must be far more sanguine on its fiscal 2017 projections than most on the Street, however, as a $150 price target calls for EPS of $9.37.

Why AAPL can hit $150. It might sound like a bit of a stretch that a company as large as Apple could grow its market capitalization by 13.5 percent over a short period of time, but price targets are typically given with the understanding that there will be 12 months for them to play out. Given the fact that the market itself has risen 25 percent in the last 12 months, 13.5 percent over the next 12 months isn’t too much of a stretch.

Plus, Apple is blessed with a hoard of more than $200 billion in cash, $31 billion of which is greenlighted to be spent buying back AAPL stock. That should give share prices an extra boost and help lift earnings per share figures.

Finally, you never know how market psychology will play into share prices, and the de-regulatory, anti-tax nature of the Trump administration has certainly been applauded by Wall Street.

“The only upside remaining to $150 or $170 has to come from the tax benefit of Apple’s large foreign capital repatriation, which is not counted into the most target prices,” says K C Ma, professor of finance at Stetson University.

It’s probably not factored into most models because the U.S. reducing or doing away with the repatriation tax is by no means a done deal, although it is possible. Apple has more than $180 billion in cash overseas.

Why to be cautious. So while $150 is by no means an unreasonable level for AAPL stock at some point in the next year or so, there are some longer-term concerns that investors should be aware of. The most pressing issue is probably Apple’s blatant lack of innovation: Since Steve Jobs died, the only new product Apple’s come out with was the Watch, a product that isn’t successful enough to be broken out as its own line item and is considered by many to have been an abject failure.

[See: 7 of the Best Stocks to Buy for 2017.]

If Apple continues to shun innovation and rest on its laurels, multiples will have to come back down to earth; the iPhone is an amazing product, but it can’t carry AAPL stock forever.

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Is Apple Inc. (AAPL) Stock Really Worth $150? originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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