Apple’s $100 Billion Dollar FY 2011

  • Posted: 29 July 2010 01:46 AM

    My latest missive at Eventide.

    Snippet: It’s virtually impossible to rationally forecast 50% or better growth in revenue for next fiscal year without an associated and more than commensurate rise in the company’s share price. This is due in large part to the significant discount at which the shares trade relative to current earnings and the company’s growing cash position. I reiterate my expectation for AAPL to move above $400 per share by early May 2011.

         
  • Posted: 29 July 2010 11:11 AM #1

    DT:
    An aggressive target, but a very interesting one. I can get to $95B for FY11 by adding an extra $15B in iPad sales (30M units vs. 9M for FY10), $7B additional for iPhones (up ~10M units in FY11), an extra $5B in Mac sales (4M units additional in FY11), stable iPod revenue, and a few $B for additional accessory, iTunes,  iAd and app sales.

    How to get the additional $5B to reach your $100B target appears a bit more difficult, but an iPad production and sales rate of 3M per month would just about do it. 

    Hmm, as I think more about it, perhaps you are absolutely ON TARGET. Now we just need a P/E of 50 to match that 50% growth rate. That’s your next assignment, DT!

    Alan

         
  • Posted: 29 July 2010 07:36 PM #2

    Hannibal - 29 July 2010 02:11 PM

    Hmm, as I think more about it, perhaps you are absolutely ON TARGET. Now we just need a P/E of 50 to match that 50% growth rate. That’s your next assignment, DT!

    I’d take a lowly p/e of 25 and be quite happy….

         
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    Posted: 29 July 2010 10:33 PM #3

    DawnTreader - 29 July 2010 10:36 PM

    I’d take a lowly p/e of 25 and be quite happy….

    I’m working on early FY 2011 forecasts for Apple. At this time I expect Apple to realize roughly $100 billion in revenue and a corresponding $23 or more in eps for the year.

    With both those, AAPL shares will officially be worth a boat load of money.

         
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    Posted: 29 July 2010 10:50 PM #4

    $100 billion is possible for FY ‘11, but much of that depends on iPhone 4 (and iPhone 4G/5) growth, which will be influenced by supply ramp-up and unabated consumer demand despite the media’s best attempts to demonize it.  I presume Apple will learn from the iPhone 4 and try their damndest to prevent gremlins in next year’s iPhone (be it paint, antenna, new chips like a dual-core A4/A5, whatever).

    As for valuation, trouble is, I can still see AAPL at $100 billion revs, $20-25 billion earnings and a P/E under 20…maybe even around 15.  The new excuse after a blowout FY 11??  “Apple’s too big to grow”, “Apple’s lucky streak has run out”, or some other ludicrous excuse that most anyone would laugh off except that “arrogant, mercurial” Apple is the subject company of those remarks.  With HFTs, lack of Uptick Rule, countless ways to “play” the market to the detriment of the typical buy-and-hold types, and an increasing cynicism about Wall Street, combined with the general unbelievable “skepticism”/FUD about Apple/AAPL, there’s a ton of headwinds to deal with.

    I remain optimistic, but I’m also “realistic.”  Note the quotes - fair market value for AAPL, even in this climate “should” be 280+, but here we are.  Hope for the best, prepare for the worst.

    [ Edited: 29 July 2010 10:58 PM by Mav ]

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  • Posted: 29 July 2010 11:38 PM #5

    Mav - 30 July 2010 01:50 AM

    The new excuse after a blowout FY 11??  “Apple’s too big to grow”

    I’ll be dealing with that issue directly in an upcoming blog post.

         
  • Posted: 07 August 2010 08:36 PM #6

    DawnTreader - 30 July 2010 02:38 AM
    Mav - 30 July 2010 01:50 AM

    The new excuse after a blowout FY 11??  “Apple’s too big to grow”

    I’ll be dealing with that issue directly in an upcoming blog post.

    I did deal with that issue here.

         
  • Posted: 07 August 2010 08:38 PM #7

    With iPad sales not present in the prior-year comparisons of FQ1 & FQ2 of FY2011, 50% revenue growth next fiscal year is certainly not an ambitious target.

         
  • Posted: 08 August 2010 07:46 AM #8

    DT, I certainly do not dispute your forecast for $100 billion sales for 2011. What I am uncertain about is the share price. For the years I have been reading and mildly participating on this forum I believe it to be the best research tool an individual interested in Apple inc has available. The forecasting in sales, earnings has been amazingly accurate. I have done quite well in Apple over the past 7 years usually with options.
    I mention this because last Thursday I totally exited my Apple positions. And I will tell you why and why I worry about the stock.
    They say ‘don’t fall in love with a stock’  Well I am not in love with AAPL but am with Apple Inc. It truly is the most incredible company in business history. Every area they enter they totally change the way things are done. They have grown and the market price lags the current value and future value. OK I accept this and play the game accordingly HOWEVER;

    The U.S stock market has had month after month of money outflows. Individuals have not been participating and the ones that do are redeeming their mutual fund at an alarming rate. The main holders of AAPL is mutual funds. The short term treasuries 2 year are yielding about one half of one percent and the ten year is at 2.82%!! That is where the money is going; basically to cash. Confidence in the system, regulators, govt. is non existent .... I look at the action in Apple over the last few weeks and months with the most startling bullish revelations, from blockbuster earnings, shocking guidance, mind blowing products that are in such demand WORLD WIDE that keeping them in stock is a Herculean task. The stock is not reacting the way it should. In a normal market it would be $360 not $260.
    They can call it consolidation but that is not good enough for me. I will be back in Apple when the fundamental economic situation looks brighter or when I have the confidence that the US politicians are ready to do the tough things that their voters will hate. Cut spending, get rid of lobbyists, an SEC with brains and guts to truly regulate the casino called wall street.
    Hey if the stock rallies next week to $280+ great! a new high and I will have gotten out way too early, But to me the risk/reward is not properly lined up. Sorry for the downer and you and I both hope I am wrong on the stock. Fortunately for you I am wrong ...a lot

         
  • Posted: 08 August 2010 08:14 AM #9

    Adam,

    Those who can?t, or won?t, pay $500 for the entry level current iPad might pay $300 or so for the entry level smaller screen version

    I don’t think we’ll see a smaller format iPad. The pattern may unfold with the iPad2 having a few features not included in the 1st version. The price point may even drop $25 or $50 for the new model. More likely we’ll see a two sided version, not this holiday season, but that is the type progression I think Apple will follow. They won’t back up to fill price points that are already covered with the touch offerings. Time will tell.

         
  • Posted: 08 August 2010 03:07 PM #10

    SNIPUS - 08 August 2010 10:46 AM

    The U.S stock market has had month after month of money outflows. Individuals have not been participating and the ones that do are redeeming their mutual fund at an alarming rate. The main holders of AAPL is mutual funds. The short term treasuries 2 year are yielding about one half of one percent and the ten year is at 2.82%!! That is where the money is going; basically to cash. Confidence in the system, regulators, govt. is non existent .... I look at the action in Apple over the last few weeks and months with the most startling bullish revelations, from blockbuster earnings, shocking guidance, mind blowing products that are in such demand WORLD WIDE that keeping them in stock is a Herculean task. The stock is not reacting the way it should. In a normal market it would be $360 not $260.

    I agree. In a normal market the shares should be trading at $360, not $260. I tend to take a patient and long-term view. I’m uncomfortable attempting to time this market. My view is the money flows will reverse and eventually much of the money on the sidelines will return to equities. But flip a coin to guess when.

    One of the inescapable dilemmas faced by government entities in the US (federal, state and local) are ballooning pensions costs and in the private sector underfunded pension liabilities. While the dramatic move away from defined benefit pension programs and the move to defined contribution pension programs provides some long-term relief, the only way to shrink the pension deficit balances is through an inflation of equity prices.

    So far the re-inflation of equity prices has alluded the White House in its efforts to kick-start the economy through trillion-dollar stimulus programs. Absent equity price inflation the rates of domestic economic growth will remain lackluster and anemic. For now equity prices are not responding to the expansion of corporate profits.

    To increase consumer spending consumers must sense growth in personal wealth. This requires a rebound in home prices (home equity) and a re-inflation of equity prices as well as a reduction in the rates of unemployment and underemployment. The political questions that remain are limited to which avenues to travel to achieve these goals.

    Investors will return to equities eventually. The only question is: When?

         
  • Posted: 08 August 2010 04:27 PM #11

    But flip a coin to guess when.

    Maybe Nov. 3rd…......

         
  • Posted: 08 August 2010 06:41 PM #12

    danthemason - 08 August 2010 07:27 PM

    But flip a coin to guess when.

    Maybe Nov. 3rd…......

    I suspect the markets will respond positively to a change in party control of the House or Senate or both the House and the Senate and/or a loss of working control of both chambers even if the majority party keeps a thin majority following the fall election cycle.

    Wall Street tends to prefer political certainty to uncertainty and if the Democratic majority in the Senate falls to 55/45 or less, very little will get accomplished without bi-partisan support and long lead times. That tends to cheer the Street.

    Historically the American public prefers to split political control of the executive and legislative branches as its own form of checks and balances.

    But beyond partisan or party politics is the need to re-inflate equity prices as a means to cure the problems unfunded pension liabilities running into the hundreds of billions of dollars that can be not be practically remedied any other way.

    Rising stock prices are a means to increase consumer perceptions of rising wealth and the sense of wealth or economic security is an important component of consumer sentiment. The economy will not rebound in full until consumers head back to the stores and return to habits of discretionary spending.