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Here's Why Apple Is Witnessing A Tremendous Rally

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Apple Inc. (NASDAQ: AAPL) is continuing to ride high and breaking market capitalization records. In the last month alone the company’s shares have increased 12 percent -- a whooping $50 billion move. However, some people are questioning the high valuation Apple commands, especially when the company is so much dependent on iPhone sales.

Brian White, analyst at Cantor Fitzgerald, was recently on Bloomberg to explain what is driving the stock higher and allows the company to command such high valuations.

"I think there's three factors: one, the market really got it wrong that Apple is not an innovator. Number two, the valuation is still very depressed, 13 times ex-cash. If you look at companies that sell sugar water, they trade at 20 times and grow at 6 percent a year. And number three, we're getting the first new product category since 2010 with the iPad. We call that a supercycle; when you get a new product category, that's great for the stock, that's great for Apple," Fitzgerald said.

When asked about what he thinks about the potential of Apple Watch as a product, Fitzgerald said, "I think it will be huge and if you look at the number of watches sold each year, it's off the charts. Now a lot of these are cheaper watches, but the total number is actually incredible. When I think about the Apple Watch, we used an 18 to 20 percent conversion rate, you can get about $13 billion in revenue, 60 to 70 cents in EPS. I think it will be the fastest-growing new product category in Apple's history."

Shares of Apple recently traded at $117.84, down 0.67 percent.

Posted-In: Bloomberg Brian WhiteAnalyst Color CNBC Long Ideas Intraday Update Media Trading Ideas


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