30x in seven years: again?

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    Posted: 19 January 2011 02:25 PM

    Reading through the board this week, many comments have been made about the unbridled potential of Apple. Comments like “just scratching the surface”, “limitless upside”, “exponential market share” make me think back to 2004 and AAPL at 12. In just 7 years we’re looking at a 30x multiple - a $40k investment then equals millionaire today.

    So, with all the positive vibe following the conference call, a hyper-accurate rearview mirror, and a better-than-average crystal ball, can we tell the young twenty-something lurkers to go all in NOW and see 30x by 2018?

    (will chime back in after a few comments)

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    Posted: 19 January 2011 02:37 PM #1

    $10,000+ per share? You’re kidding, right?

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    Posted: 19 January 2011 03:18 PM #2

    Apple II+ - 19 January 2011 06:37 PM

    $10,000+ per share? You’re kidding, right?

    We would be counting when market cap of AAPL would be as big as US GDP :bugeyed:.

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  • Posted: 19 January 2011 07:02 PM #3

    Mace - 19 January 2011 07:18 PM
    Apple II+ - 19 January 2011 06:37 PM

    $10,000+ per share? You’re kidding, right?

    We would be counting when market cap of AAPL would be as big as US GDP :bugeyed:.

    Only if there is no inflation and GDP doesn’t grow? And wouldn’t it just mean Apple was 10% of USA “market cap”? If Apple controls the world’s cloud and its devices, sounds plausible to me.

    But regulation might take effect to curb Apple’s power.

         
  • Posted: 19 January 2011 07:13 PM #4

    $10,000 per share?! Never going to happen…

    Being a twenty something, I’m more than content for AAPL to increase by 30% per annum for the forseeable future.  That’s what I’m targeting - Warren Buffett had a compound annual growth rate (CAGR) of about 24% I believe; so a 30% CAGR might be a touch on the high side.

    However, I think AAPL will be able to give me a couple more years of, at the very least, 30% growth per annum (or more) going forward.  Will have to re-evaluate in 2013.

         
  • Posted: 19 January 2011 07:33 PM #5

    Threads like this frighten me…..this kind of talk often occurs at market tops.

         
  • Posted: 19 January 2011 08:49 PM #6

    Apple II+ - 19 January 2011 06:37 PM

    $10,000+ per share? You’re kidding, right?

    Without the last 2 stock splits AAPL would be at $1,360 now. From this perspective, apple only needs to double in price 3 more times to reach $10,880 per share.  :groucho:

         
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    Posted: 19 January 2011 10:05 PM #7

    JonathanU - 19 January 2011 11:13 PM

    $10,000 per share?! Never going to happen…

    I’m pretty sure it will happen, just not in 7 years.

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    Posted: 19 January 2011 10:12 PM #8

    Mace - 16 July 2007 01:53 AM

    Look like DT is challenging my long time prediction of AAPL’s price targets:

    Target price by 2008 ($300), 2012 ($1000), 2020 ($2441)

    Suddenly, he is excessively more optimistic than me rolleyes.

    Not sure why everyone think Mac is Apple’s future.  Perhaps, you guys are too much Mac fans.  My take is iPhone and aTV.

    This was written in 2007.  We would have hit 1000 by 2012 if the market did not crash.

    But this is the plan that I am following.  I think we will hit $2000 a share by 2021.

    Please review this thread.

    http://www.macobserver.com/tmo/forums/viewthread/56555/

         
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    Posted: 19 January 2011 10:25 PM #9

    OK, we’ve been able to bracket the question. (Assume AAPL won’t get smaller at the end of seven years.) So on one end, AAPL will certainly not stay the same for seven years. On the other, AAPL will probably not grow to 10,800 (!!!). Unfortunately, I don’t see any way to create a third point to fair in a curve, especially with an open-ended system such as the real world: seven years from now the pie we are carving up this year will be vastly different.

    With all the daily/quarterly/annual talk around here, I wanted to offer up something for the longs to ponder. Maybe a split, or spinning off several new businesses, or something unimaginable? It’ll be fun to watch it play out. With no way for AAPL to increase as it has in the past, I’ll be happy to take what I can get!

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  • Posted: 19 January 2011 11:35 PM #10

    rezonate - 19 January 2011 06:25 PM

    Reading through the board this week, many comments have been made about the unbridled potential of Apple. Comments like “just scratching the surface”, “limitless upside”, “exponential market share” make me think back to 2004 and AAPL at 12. In just 7 years we’re looking at a 30x multiple - a $40k investment then equals millionaire today.

    So, with all the positive vibe following the conference call, a hyper-accurate rearview mirror, and a better-than-average crystal ball, can we tell the young twenty-something lurkers to go all in NOW and see 30x by 2018?

    (will chime back in after a few comments)

    I wouldn’t bet the farm on 30X in 7 yrs., but at the rate Apple introduces new products with phenomenal margins, the future is bound to be good:

    Every Fortune 500 company is testing or has adopted the ipad.
    Apple just patented a projection 3D TV
    Turnover for ipad will be much faster than notebooks at enterprises
    China handing out thousands of iphones to top party officials
    The list goes on

         
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    Posted: 19 January 2011 11:48 PM #11

    Every company has missteps. AAPL has had missteps in the past and Im quite positive it will have missteps in the future.
    Whether it is a crummy product or just poor execution it is bound to happen eventually. The higher the share price goes the less leeway AAPl will have in case of such missteps and they will be constantly under the microscope. I dont think we are anywhere near the top but trying to speculate where AAPL will be any further out than 5 years seems futile. Not trying to dissuade you guys from discussing it though. 8)

    Just way too much can happen in between now and then, especially in light of current health concerns. Seems as though the only way AAPL will ever get it’s proper respect is if the current team at AAPL provide blowout numbers for the next 3 years straight without Mr Jobs’ help. Even then I’m pretty confident the naysayers will be lined up to tear down their success.

         
  • Posted: 19 January 2011 11:50 PM #12

    Apple II+ - 19 January 2011 06:37 PM

    $10,000+ per share? You’re kidding, right?

    Berkshire Hathaway A shares are over $123,000 per share now.  Apple’s business is much faster growing.  Granted BRK.A has been around a while longer.

         
  • Posted: 20 January 2011 12:19 AM #13

    I don’t expect 30x in seven years but I do think it is possible for Apple the company (if not the stock) to grow at 30 percent or better annually (on average) for the next 7-10 years, including possibly around 70 percent EPS growth this year (CY YoY).  While the growth rate will slow at some point, it actually could continue at roughly 50-75 percent annually for 2-3 more years based on the size and growth rates of its addressable markets.

    Although I think we should appropriately concern ourselves with appropriate valuations, I also think it is helpful to ask the question how big could Apple theoretically become as a % of the global stock market, global economy, etc., just as a way of testing the upper boundaries of growth in the long term. 

    I think too many people are doubting the company’s potential simply because it is so big, yet there may actually be some aspects of its scale that are ENABLING it to maintain such a large growth rate.  Examples: (1) ability to source components at very competitive prices, including but not limited to things like Cook’s announced multibillion dollar “secret” components agreement; (2) ability to really nail all the details of every aspect of their products (since they sell huge dollar volumes but with a relatively small array of products) so that they are usually the most polished on the market; (3) ability to invest massive amounts relative to competitors in marketing without materially harming profit margins; (4) ability to “invest” a significant portion of COGS savings relative to competitors in outstanding customer service.

    Analysts seem to think that Apple’s growth is going to slow down to around 20 percent per year.  They are probably right but they are at least 3-5 years too early.  In the interim period, Apple may double its EPS a couple more times before it settles down.

         
  • Posted: 20 January 2011 12:22 AM #14

    Apple currently has about 5% of the computer and phone business worldwide.  What does it look like if they move to 20% over the next seven years?

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    Posted: 20 January 2011 04:18 AM #15

    rezonate - 19 January 2011 06:25 PM

    Reading through the board this week, many comments have been made about the unbridled potential of Apple. Comments like “just scratching the surface”, “limitless upside”, “exponential market share” make me think back to 2004 and AAPL at 12. In just 7 years we’re looking at a 30x multiple - a $40k investment then equals millionaire today.

    So, with all the positive vibe following the conference call, a hyper-accurate rearview mirror, and a better-than-average crystal ball, can we tell the young twenty-something lurkers to go all in NOW and see 30x by 2018?

    (will chime back in after a few comments)


    First up, I like the insanity of your proposition.

    Wild speculation follows….

    Second, I like the thought process involved in what it would take for apple to reach $10000 a share, and consequently be worth somewhere in the region of 10 trillion dollars.

    1. In 7 years time, for whatever reason, maybe a super bull market, apple is valued at a P/E of 25 requiring apple to have earnings of close to 400 billion in earnings

    To get to that level, the following could happen:

    iPhone
    - the mobile handset market grows to 1 billion handsets a year.
    - apple did what it did to the mp3 player market and grabs 70% market share.
    - apple maintains a $300 margin per phone.
    - 700 million x $300 gets us to $210 billion in earnings before tax.

    iPad
    - the tablet market explodes as predicted, and in 7 years is a 300 million annual unit industry
    - apple has a 80% market share
    - apple has a $200 margin per device
    - 240 million x $200 = lets call it 50 billion more

    Macs
    - in 7 years the PC market hasn’t grown much to 400 million, but macs now have a 30% market share
    - macs have a $400 margin average
    - 120 million x 400 = let’s call it another 50 billion once you include Mac accessories.

    Other (including iPods, iTunes, app revenue, royaltys, accessories)
    - less iPods, big growth in app revenue, media revenue.
    - let’s call it 10 billion

    Cash
    - apple continues to hoard it’s cash for the next 7 years, and given the increase in cash-flow ends up with a massive $500 billion at least
    - interest rates improve and apple generates $30 billion a year

    Future unannounced apple product or acquisition/merger
    - I assume in the next 7 years apple has the capability to add another 1 or 2 huge product line, so I’m going to just go ahead and give them a $50 billion a year income.

    And there we have it - $400 billion.

    You notice I didn’t mention taxes. Whatever taxes would be applied to the above, you can go ahead and cancel out by the decline of the US dollar, thereby increasing the value of the overseas portion of apples earnings which will probably be close to 75-80% of It’s total.

    There we go, a wild WILD speculative example, but then if apple only achieves 20% of the above overly ambitious targets, then we could be looking at $2000 a share - which would in of itself a HUGE HUGE magnificent performance.

    We would all be very rich.

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