Morgan Stanley’s ‘bull case’ for Apple: 80 million iPhones, $500 per share

  • Avatar

    Posted: 03 November 2010 03:33 PM

    $500 by next August! From their lips to the market’s ears!

    http://tech.fortune.cnn.com/2010/11/03/morgan-stanleys-bull-case-for-apple-80-million-iphones-500-per-share/?source=yahoo_quote

    Signature

    We filed for over 200 patents for all the inventions in iPhone and we intend to protect them. — Steve Jobs, 2007

         
  • Avatar

    Posted: 03 November 2010 06:21 PM #1

    JDSoCal - 03 November 2010 06:33 PM

    $500 by next August! From their lips to the market’s ears!

    http://tech.fortune.cnn.com/2010/11/03/morgan-stanleys-bull-case-for-apple-80-million-iphones-500-per-share/?source=yahoo_quote


    Kind of redundant from yesterday. (2nd article) The more the merrier.

    http://blogs.barrons.com/techtraderdaily/?s=aapl&x=0&y=0

    Signature

    Adversity does not just build character, it reveals it.

         
  • Avatar

    Posted: 03 November 2010 06:42 PM #2

    mbeauch - 03 November 2010 09:21 PM
    JDSoCal - 03 November 2010 06:33 PM

    $500 by next August! From their lips to the market’s ears!

    http://tech.fortune.cnn.com/2010/11/03/morgan-stanleys-bull-case-for-apple-80-million-iphones-500-per-share/?source=yahoo_quote


    Kind of redundant from yesterday. (2nd article) The more the merrier.

    http://blogs.barrons.com/techtraderdaily/?s=aapl&x=0&y=0

    I didn’t see a $500 target from a major investment bank in that story. tongue wink

    Signature

    We filed for over 200 patents for all the inventions in iPhone and we intend to protect them. — Steve Jobs, 2007

         
  • Avatar

    Posted: 03 November 2010 08:09 PM #3

    If those iphone/ipad numbers come true the price will take care of itself.

    Signature

    Adversity does not just build character, it reveals it.

         
  • Avatar

    Posted: 03 November 2010 08:30 PM #4

    mbeauch - 03 November 2010 11:09 PM

    If those iphone/ipad numbers come true the price will take care of itself.

    Amen, brother.

    Signature

    We filed for over 200 patents for all the inventions in iPhone and we intend to protect them. — Steve Jobs, 2007

         
  • Posted: 03 November 2010 10:06 PM #5

    Most recently Apple shipped 14.1 million phones in a quarter. 90% increase over year ago. If the growth continues 80 million is no stretch. 100 million would fit the current growth trends . Same goes for that $500 number.

    Dan

         
  • Posted: 04 November 2010 02:57 AM #6

    $500 per share by next August could be obtained with an expansion of the p/e multiple to 22.48 from the current 20.64 and a continuation of the September quarter’s 67.5% eps growth rate for three more quarters. In other words it’s not an unreasonable bullish case scenario.

         
  • Posted: 04 November 2010 03:39 AM #7

    adamthompson3232 - 04 November 2010 06:18 AM
    DawnTreader - 04 November 2010 05:57 AM

    $500 per share by next August could be obtained with an expansion of the p/e multiple to 22.48 from the current 20.64 and a continuation of the September quarter’s 67.5% eps growth rate for three more quarters. In other words it’s not an unreasonable bullish case scenario.

    If Apple shows another 3 Qs of 67% EPS growth the EPS multiple will undoubtedly (in my opinion, assuming the market is relatively flat or better between now and then) be higher than 20.6. Looking at analyst estimates for next year explains why the stock is not much higher today already. They simply can’t seem to grasp what is so obvious to many of us here - that apple is better positioned for rapid and significant revenue and EPS growth than perhaps every other mega cap in the history of the world (seriously).

    I touched on this subject just under two months ago in this blog post. It was written before the September quarter results were released, but overall outlook remains quite relevant today.

         
  • Avatar

    Posted: 04 November 2010 04:48 AM #8

    adamthompson3232 - 04 November 2010 06:51 AM

    I see the same thing happening again and again for the foreseeable future as analyst consensus may never catch up to the AAPL locomotive.

    Well, I’ve held AAPL long for almost 20 years, and it never ceases to amaze me how the stock seems to respond negatively to what for most companies would be good, even great news. It’s taken a lot of will power to blow off what the experts said all those years, and hold.

    For the record, never in my wildest dreams did I think AAPL would perform as well as it has. Hell, I bought before Jobs even returned. But the loyalty of the Mac faithful, and the elegance of Apple design always convinced me not to bolt (in fairness, I liked Apple computers since the Apple II, although I no longer own any). Of course Jobs’ return is what made me really hold tight(ly).

    I think with AAPL, patience is a virtue. So it’s a $300 stock that would trade at $900 if it had multiples of, IMO, magnitudes less impressive companies like Netflix and Amazon. You just have to hold and wait.

    Glad to see I have some fellow travelers. I still get the “when are you going to sell? It’s 300!” from my friends, some of whom I almost begged to buy all along the way. One told me how Apple was too expensive at $125 and $200.

    Signature

    We filed for over 200 patents for all the inventions in iPhone and we intend to protect them. — Steve Jobs, 2007

         
  • Avatar

    Posted: 04 November 2010 05:08 AM #9

    DawnTreader - 04 November 2010 05:57 AM

    $500 per share by next August could be obtained with an expansion of the p/e multiple to 22.48 from the current 20.64 and a continuation of the September quarter’s 67.5% eps growth rate for three more quarters. In other words it’s not an unreasonable bullish case scenario.

    With that kind of EPS growth and multiple, I’d give it until next October to get to $500, similar to $300 this year, which could have happened in August but didn’t until October.

    Also, while 22.5 may be an increase from the current multiple, I wouldn’t characterize that as expansion. It’s a bit above average, but well within the PE range of the past year.

    Signature

    The only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. — Steve Jobs

         
  • Avatar

    Posted: 04 November 2010 11:50 AM #10

    Average target price for Wall Street analysts = $ 384 if updated in the past 2 months.

    Even if I throw out some ridiculous price targets (anything below) $ 351, the average is still only $ 388.

         
  • Posted: 04 November 2010 03:23 PM #11

    JDSoCal - 03 November 2010 06:33 PM

    $500 by next August! From their lips to the market’s ears!

    http://tech.fortune.cnn.com/2010/11/03/morgan-stanleys-bull-case-for-apple-80-million-iphones-500-per-share/?source=yahoo_quote

    hmm, my model has AAPL at $506 by October earnings.  In the six years I’ve been doing this, this is the closest a “pro” has come to one of my forecasts.

    Signature

    You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.

         
  • Posted: 04 November 2010 03:32 PM #12

    DawnTreader - 04 November 2010 05:57 AM

    $500 per share by next August could be obtained with an expansion of the p/e multiple to 22.48 from the current 20.64 and a continuation of the September quarter’s 67.5% eps growth rate for three more quarters. In other words it’s not an unreasonable bullish case scenario.

    PE is nothing more (although very important) than an expression of Investor Sentiment.  With the elections over (and any uncertainty on outcome removed) investors feel much better about the costs of doing business going forward.  That will translate into higher ISMs (Investor Sentiment Multiplier - my term for PE).

    I’m using an ISM of ~23.50 for setting future AAPL targets, although I think it probable that ISM will go even higher.

    Signature

    You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.

         
  • Posted: 04 November 2010 03:40 PM #13

    adamthompson3232 - 04 November 2010 06:18 AM
    DawnTreader - 04 November 2010 05:57 AM

    $500 per share by next August could be obtained with an expansion of the p/e multiple to 22.48 from the current 20.64 and a continuation of the September quarter’s 67.5% eps growth rate for three more quarters. In other words it’s not an unreasonable bullish case scenario.

    If Apple shows another 3 Qs of 67% EPS growth the EPS multiple will undoubtedly (in my opinion, assuming the market is relatively flat or better between now and then) be higher than 20.6. Looking at analyst estimates for next year explains why the stock is not much higher today already. They simply can’t seem to grasp what is so obvious to many of us here - that apple is better positioned for rapid and significant revenue and EPS growth than perhaps every other mega cap in the history of the world (seriously).

    Exactly.  If you extend Apple’s revenue, using nothing more than the seasonal 3 year AVERAGE in unit sales growth, you get 60% YoY growth.  Given that that average does not include iPad revenue 60% growth is paltry.

    Signature

    You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.

         
  • Avatar

    Posted: 04 November 2010 03:47 PM #14

    Gregg Thurman - 04 November 2010 06:32 PM
    DawnTreader - 04 November 2010 05:57 AM

    $500 per share by next August could be obtained with an expansion of the p/e multiple to 22.48 from the current 20.64 and a continuation of the September quarter’s 67.5% eps growth rate for three more quarters. In other words it’s not an unreasonable bullish case scenario.

    PE is nothing more (although very important) than an expression of Investor Sentiment.  With the elections over (and any uncertainty on outcome removed) investors feel much better about the costs of doing business going forward.  That will translate into higher ISMs (Investor Sentiment Multiplier - my term for PE).

    I’m using an ISM of ~23.50 for setting future AAPL targets, although I think it probable that ISM will go even higher.

    An increased multiple could mean one of two things: either keeping AAPL higher within the same range or an increase that pushes the top end of the multiplier range higher, say 25+.

    Do you expect a higher multiplier at the top end of the multiple range or just on average?

    23.5 is still within the multiple range we have seen in the last year, albeit above average and at the high end. Indeed, we have hit 23.5 in every quarter for the past year. Have you been using 23.5 for a while, or does that reflect your expectations for an increase?

    Signature

    The only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. — Steve Jobs

         
  • Posted: 04 November 2010 03:55 PM #15

    Apple II+ - 04 November 2010 06:47 PM
    Gregg Thurman - 04 November 2010 06:32 PM

    PE is nothing more (although very important) than an expression of Investor Sentiment.  With the elections over (and any uncertainty on outcome removed) investors feel much better about the costs of doing business going forward.  That will translate into higher ISMs (Investor Sentiment Multiplier - my term for PE).

    I’m using an ISM of ~23.50 for setting future AAPL targets, although I think it probable that ISM will go even higher.

    An increased multiple could mean one of two things: either keeping AAPL higher within the same range or an increase that pushes the top end of the multiplier range higher, say 25+.

    Do you expect a higher multiplier at the top end of the multiple range or just on average?

    23.5 is still within the multiple range we have seen in the last year, albeit above average and at the high end. Indeed, we have hit 23.5 in every quarter for the past year. Have you been using 23.5 for a while, or does that reflect your expectations for an increase?

    I lost over $500K betting on a post July earnings pop, that relied on an ISM higher than the realized 23.67.  I expect ISMs higher than that going forward, but am not counting on it with my trades.  I guess you could say I am using ~23.50 as a ‘safe’ investment threshold.

    Signature

    You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.