Is the Apple hype justified?

Will the interest in Apple continue to swell or will investor enthusiasm wane?


The well oiled hype machine that is Apple Inc. has kicked into overdrive in recent weeks with salivating analysts eagerly jumping aboard the share price target train to la la land. Yes, the company has confirmed it’s returning an initial $10bn of its $100bn cash pile to investors and yes, it posted record sales for its iPhone in Q4 and strong numbers for its latest iPad offering.

But does Apple – currently trading at $636 – justify a 12-month price target of $1001 recently set by Brian White of Topeka Capital Markets. Or $1000 by 2014, from Gene Munster of Piper Jaffray?

Ed Zabitsky, an analyst with Toronto-based ACI Research, certainly doesn’t buy into the Apple story and maintains a ‘sell’ recommendation.

Setting a $270 price target back in January (at a time when Apple was trading over $450) Zabitsky advised investors to ‘sell short’ arguing the strength of the iPhone won’t last forever, given Google’s Android 4.0 operating system will eventually become a major rival.

Zabitsky also believes the development of HTML5 and 4G will improve the access and functionality of web apps, which in turn will see the existing system Apple employs of forcing users to buy and download from the company’s App store become less relevant. Content is set become king and made available everywhere – not just from Apple – as true mobile broadband Internet levels the playing field for other vendors.

Time will tell if Zabitsky is right. A more tempting thought in the meantime is to liken Apple’s natural customer base to extras out of the famous George Romero film Dawn of the Dead.

Holed up in a suburban shopping mall with zombies attempting to break in, one local asks another what they’re attempting to achieve, to which his colleague replies that they went there while they were alive and simply don’t know any better, even though they’re now dead. In other words, it’s business as usual.

So, the next time you see hordes of customers gathered overnight outside your local Apple store ahead of the next major product launch, just think of George Romero.