Perspective on that.
Time for our next big trade, where we bring you the bonus calls on wall street.
The people behind them?
Very apropos, we are talking about apple.
You just heard the breaking news.
21% so far this year, margins have been shrinking, obviously creating some pressure.
The iphone, losing market share to android.
Our next guest has just upgraded to a strong buy.
Let's ask him to explain exactly what is going on here.
I tell you what, before we get into your thesis, maybe you can comment on the breaking news that we just heard, where we potentially have a deal between time warner cable and apple tv.
Explain why that is significant, from your point of view.
Hard to know the details, but clearly they continue to be interested in tv and media and eventually they will be in the tv market.
They are not trying to replace cable companies.
They did not try to replace or replicate wireless networks when they released the iphone.
Likely what it will become is how you get your long tail, -- long tail content.
In other words time warner cable is giving you the access and apple becomes the front end, the package, the pretty thing that you see them like a silver plated faucet?
That is what you see, not the plumbing behind it.
Ok, i think i get it.
On to your thesis about apple, this stock just upgraded today.
Explain this to the viewers.
The valuation is beyond a little bit cheap, it is a lot cheap.
At the time of upgraded was about 11% cash flow yield and unless you can build a case that these earnings will not be going down perpetually, it is hard not to be overweight the stock.
The reason behind the timing of the upgrade making sense, it is a new product cycle here.
Nine months from the launch of the iphone5. although it was a big success in the u.s., it was not so much of its success outside the u.s., where there were no lte networks.
We are within a couple of quarters of lapping those low gross margins.
I think that this is more of a one time blip down the margins.
If it was not for currency and memory pricing headwinds, i would say that they would be headed up already.
We would at least see the visibility towards flat if not slightly increasing gross margins going forward.
As it starts getting better, the stock has reacted positively.
What does it look like in japan?
I do not know, look, part of the bigger picture, folks think of apple as a smart phone company, but the importance of ios is not the product, it is the ecosystem, the operating system of the future.
The first iteration of this was not in smart phones and tablets, which are basically thin pieces of glass, but the system is going to develop new products down the road.
It could be a box.
There are 14 -- it could be a watch.
There are 14 car manufacturers that have been discussed.
The ability for them to kind of locked consumers into the ecosystem is powerful.
Making applications that drive you to purchase iphones and ipad now that you have ios in your car, on your television.
It goes way beyond the argument of the smartphone market being done growing.
It is reasonably close.
There is still a lot of growth left in this mobile computing marketplace.
We know that the stock is trading very cheap right now.
As of next year it is trading at 420. basically $220, six times x, which is cheap.
In the last 30 seconds, how do you get to $532 on a valuation basis?
Couple of things, they are buying back a lot of stock and paying over $12 per share dividends, so i think the cash balance will be around $150, maybe a bit more than that next year.
That is basically an s&p multiple pe on the next year's earnings, trading at a significant discount.
Once the earnings growth turns positive next year, the chances of this getting a multiple in mind is pretty strong.
Raymond james, thank you for
This text has been automatically generated. It may not be 100% accurate.