AAPL Target Price: $450 Per Share

  • Posted: 25 September 2010 09:20 PM

    AAPL Target Price: $450 Per Share

    My latest missive at Eventide.

    Snippet: In evaluating and forecasting Apple one must look beyond the individual product lines and look at the performance of the company as a whole. In fiscal year 2011 Apple may have a second consecutive year of 50% revenue growth and 60%+ growth in earnings per share.

    The numbers support it. I won’t deny it. We’ll see how quickly the pros revise their projections for AAPL to match the revenue, earnings and share price appreciation potential the active members of the AFB discuss everyday.

         
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    Posted: 25 September 2010 10:02 PM #1

    Quote : anticipated FY 2011 earnings of $24 per share.

    Of course, this averages to $ 6 / quarter.    Suppose the Jan-Mar quarter is a bit weak, comparatively speaking at $ 5.  Then Q3 & Q4 would be higher.  For the sake of discussion, let us say Q3 is $6 & Q4 is $7. 

    Cutting to the chase, I’m feeling that 24 is higher than my optimistic raise.

         
  • Posted: 25 September 2010 10:19 PM #2

    Tetrachloride - 26 September 2010 01:02 AM

    Quote : anticipated FY 2011 earnings of $24 per share.

    Of course, this averages to $ 6 / quarter.    Suppose the Jan-Mar quarter is a bit weak, comparatively speaking at $ 5.  Then Q3 & Q4 would be higher.  For the sake of discussion, let us say Q3 is $6 & Q4 is $7. 

    Cutting to the chase, I’m feeling that 24 is higher than my optimistic raise.

    I consider $24 per share in FY 2011 eps conservative considering an anticipated 50% increase in revenue. It represents roughly 60% eps grown over FY 2010 results. FY 2010 eps should come in at or around $15 per share. That’s below the pace of FY 2010 eps growth and the Apple iPad will be available (presumably in ample supply) for all four quarters of the fiscal year.

    I have purposely kept the estimate conservative so discussions don’t focus as much on the eps as the share price appreciation potential. I don’t consider my price target to be aggressive.

         
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    Posted: 25 September 2010 10:20 PM #3

    Allow me to play the contrarian.  How would you respond to:

    “Apple’s played out, there’s no possible way it can continue growing this quickly.”

    “Apple’s growth has to slow down at some point, whether by competition which always catches up and overtakes Apple, or just plain running out of steam, so its share price should reflect eventual reality.”

    “It’s preposterous to declare the maker of sealed-in batteries and walled gardens to be the #1 company in the world by market cap.”

    This isn’t the sum total of the naysayer’s arguments but they are representative.  Clearly many investors don’t raise these “concerns.”  But many do, and they may help keep AAPL’s share price constrained without education on just how special a company Apple is.

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  • Posted: 25 September 2010 10:40 PM #4

    I am more focused on Jan 2011 than November 2011.

    Many things will unfold between Jan and November that can impact the share price then.

         
  • Posted: 25 September 2010 11:16 PM #5

    roni - 26 September 2010 01:40 AM

    I am more focused on Jan 2011 than November 2011.

    Many things will unfold between Jan and November that can impact the share price then.

    I agree. Unfortunately in forecasting one can’t reliably gauge unknowns or extraordinary events. But on what’s known and the pace of current sales growth, including the Apple iPad available for all four fiscal quarters of FY 2011, AAPL is on a nice upward trajectory and the continuing pace of strong revenue and earnings growth continues through FY 2011.

         
  • Posted: 25 September 2010 11:24 PM #6

    DawnTreader - 26 September 2010 02:16 AM
    roni - 26 September 2010 01:40 AM

    I am more focused on Jan 2011 than November 2011.

    Many things will unfold between Jan and November that can impact the share price then.

    I agree. Unfortunately in forecasting one can’t reliably gauge unknowns or extraordinary events. But on what’s known and the pace of current sales growth, including the Apple iPad available for all four fiscal quarters of FY 2011, AAPL is on a nice upward trajectory and the continuing pace of strong revenue and earnings growth continues through FY 2011.

    And I agree with you also smile

         
  • Posted: 26 September 2010 12:05 AM #7

    Mav - 26 September 2010 01:20 AM

    Allow me to play the contrarian.  How would you respond to:

    “Apple’s played out, there’s no possible way it can continue growing this quickly.”

    “Apple’s growth has to slow down at some point, whether by competition which always catches up and overtakes Apple, or just plain running out of steam, so its share price should reflect eventual reality.”

    “It’s preposterous to declare the maker of sealed-in batteries and walled gardens to be the #1 company in the world by market cap.”

    This isn’t the sum total of the naysayer’s arguments but they are representative.  Clearly many investors don’t raise these “concerns.”  But many do, and they may help keep AAPL’s share price constrained without education on just how special a company Apple is.

    On the first two arguments:

    I heard them in 2003 following the explosive growth of iPod sales.

    We heard the same arguments in 2008 following the release of the original iPhone and before the 3G iPhone debuted.

    We hear the arguments a 3rd time following the early success of the Apple iPad.

    Interesting how much Apple has grown and changed but the outdated thinking remains the same.  grin

         
  • Posted: 26 September 2010 12:18 AM #8

    Mav - 26 September 2010 01:20 AM

    Allow me to play the contrarian.  How would you respond to:

    “Apple’s played out, there’s no possible way it can continue growing this quickly.”

    “Apple’s growth has to slow down at some point, whether by competition which always catches up and overtakes Apple, or just plain running out of steam, so its share price should reflect eventual reality.”

    “It’s preposterous to declare the maker of sealed-in batteries and walled gardens to be the #1 company in the world by market cap.”

    This isn’t the sum total of the naysayer’s arguments but they are representative.  Clearly many investors don’t raise these “concerns.”  But many do, and they may help keep AAPL’s share price constrained without education on just how special a company Apple is.

    I know this was addressed to DT but thought I’d post something I sent to my nephew in July of 2009.  This was an amplification of a discussion that started in 2007 re: my all in strategy and Apple.  I continue to believe it’s essence.

    There was a discussion in one of the bulletin boards that I frequent a couple of years ago about the likelihood of AAPL being the first trillion dollar company.  The consensus seemed to be that it was a real possibility.  That was before the meltdown of course and who knows whether stocks will ever get the kind of multiple that they once did.

    I continue to believe that the way to think about Apple is to do this:

    Microsoft + Sony + Nokia + Blockbuster + Dell + Tower Records = Apple

    When I first proposed this, Sony, Dell and Tower were considerably more vibrant companies and had yet to be marginalized by Apple.  It’s interesting to note that many years ago, (shortly after Michael Dell made his famous quote about shutting down Apple and giving the money back to the shareholders) Steve Jobs referred to the growth possibilities within the PC segment and said, “we’re coming after you Dell”.  At the time few took him seriously but he’s stolen all the high end (margin) business from them in both desktop and laptop sales.  They briefly held the education market but I’m pretty sure that’s no longer the case.  Anyway, he’s just about finished with Dell and (though I never expect to hear the words) he’s going after Microsoft next.  Snow Leapord will be the first throw of the gauntlet so to speak.  It’s another classic Apple move (iPod) which doesn’t look like much on the surface but now has most of the core technologies built, included, and optimized. (resolution independence being the exception so far).  It’s true 64 bit but continues to run 32 bit software (unlike Vista 64 bit), has a modern graphics kernal (open CL) that will be able to use the crazy processing speeds of the graphics chips for general computing.  The software development kit includes something they’re calling Grand Central which will optimize code writers software for multiple cores and includes full support for Microsoft exchange server right out of the box. I think you’ll see the ramifications of what this makes possible about a year from now when the software it enables starts to show up. 

    The financial world continues to ignore the non-gaap (read real) numbers that Apple supplies to say nothing of it’s now 32 Billion in cash. 

    It should be clear to all by now that the iPhone isn’t just a phone but a next gen computing device.  (which I think I said at it’s intro with my last email to you re: AAPL).  More succinctly, I think the smartphone wars are over…Apple won…,the world just doesn’t know it yet.

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    Posted: 26 September 2010 12:29 AM #9

    DT, I’ve been thinking about this as well and come up with the same kind of numbers. New products will be unvailed (apple never sits still), the iPad will be bigger than anyone thinks, adding new stores all the time (20 more to go in china in the nxt year alone - are u kidding me???), new U.S. iPhone carriers added, App sales through the roof with all the iOS devices being added, etc.  This thing isn’t even close to being saturated.

    Will the share price get to $450? Who knows what the market will do but the earnings will be there to support it IMO.

         
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    Posted: 26 September 2010 01:25 AM #10

    DT

    In May 2010 you predicted $500 within three years. Can we expect revised long-term price targets? If so, when do you think AAPL will reach $1000? I’m thinking about four years, before 2015.

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    Posted: 26 September 2010 01:49 AM #11

    Apple II+ - 26 September 2010 04:25 AM

    DT

    In May 2010 you predicted $500 within three years. Can we expect revised long-term price targets? If so, when do you think AAPL will reach $1000? I’m thinking about four years, before 2015.

    That’s what my spread sheet is predicting.  Apple is growing faster then I expected in 2007 but the stock should have been at 500 by now. 

    I still see 2000 a share in 12 years.

         
  • Posted: 26 September 2010 02:02 AM #12

    ChasMac77 - 26 September 2010 03:29 AM

    DT, I’ve been thinking about this as well and come up with the same kind of numbers. New products will be unvailed (apple never sits still), the iPad will be bigger than anyone thinks, adding new stores all the time (20 more to go in china in the nxt year alone - are u kidding me???), new U.S. iPhone carriers added, App sales through the roof with all the iOS devices being added, etc.  This thing isn’t even close to being saturated.

    Will the share price get to $450? Who knows what the market will do but the earnings will be there to support it IMO.

    Chas:

    The impetus for the post is I can’t deny what I see. I’ve been at this a long time and strive to avoid being impacted by hype and Apple product user enthusiasm. But I don’t see a moderation in revenue and earnings growth in FY 2011 and Apple’s retail store strategy will become increasingly reliant on new product introductions.

    Apple will not and can not remain idle. It’s not in the nature of the company. This company will continue to innovate and continue to grow.

    At $24 per share in FY 2011 earnings, a p/e of less than 19 times trailing 12-month earnings is needed to reach $450 per share. AAPL could exceed that. It depends on how the market prices the shares. In my view $450 per share is reasonable as a target.

         
  • Posted: 26 September 2010 02:18 AM #13

    BillH - 26 September 2010 03:18 AM

    I know this was addressed to DT but thought I’d post something I sent to my nephew in July of 2009.  This was an amplification of a discussion that started in 2007 re: my all in strategy and Apple.  I continue to believe it’s essence.

    There was a discussion in one of the bulletin boards that I frequent a couple of years ago about the likelihood of AAPL being the first trillion dollar company.  The consensus seemed to be that it was a real possibility.  That was before the meltdown of course and who knows whether stocks will ever get the kind of multiple that they once did.

    I continue to believe that the way to think about Apple is to do this:

    Microsoft + Sony + Nokia + Blockbuster + Dell + Tower Records = Apple

    Bill:

    You and I have been exchanging posts about Apple’s thematic approach to product markets for as long as I can remember. Looking at the company as a whole will always yield a better understanding of the company’s potential than looking at the individual product segments as if they existed apart from the whole.

         
  • Posted: 26 September 2010 02:24 AM #14

    Apple II+ - 26 September 2010 04:25 AM

    DT

    In May 2010 you predicted $500 within three years. Can we expect revised long-term price targets? If so, when do you think AAPL will reach $1000? I’m thinking about four years, before 2015.

    I try to avoid forecasts more than about 18 months out. IIRC, I suggested $500 per share was two to three years out. May was a little over four months ago and $500 per share is coming closer. Extend my target out about six more months and I think we’re both there.  grin

         
  • Posted: 26 September 2010 02:46 AM #15

    DawnTreader - 26 September 2010 03:05 AM
    Mav - 26 September 2010 01:20 AM

    Allow me to play the contrarian.  How would you respond to:

    “Apple’s played out, there’s no possible way it can continue growing this quickly.”

    “Apple’s growth has to slow down at some point, whether by competition which always catches up and overtakes Apple, or just plain running out of steam, so its share price should reflect eventual reality.”

    “It’s preposterous to declare the maker of sealed-in batteries and walled gardens to be the #1 company in the world by market cap.”

    This isn’t the sum total of the naysayer’s arguments but they are representative.  Clearly many investors don’t raise these “concerns.”  But many do, and they may help keep AAPL’s share price constrained without education on just how special a company Apple is.

    On the first two arguments:

    I heard them in 2003 following the explosive growth of iPod sales.

    We heard the same arguments in 2008 following the release of the original iPhone and before the 3G iPhone debuted.

    We hear the arguments a 3rd time following the early success of the Apple iPad.

    Interesting how much Apple has grown and changed but the outdated thinking remains the same.  grin

    Bullseye!

    Each successive new product strengthens Apple’s entire portfolio.

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