Apple shares to hit near $400 by 2012?
updated 01:35 pm EDT, Wed August 11, 2010
Figure assumes high EPS ratings
If analysts are realistic, they should expect Apple shares to slot between $380 and $400 by late 2011 or early 2012, a Fortune contributor claims. Many people are still assuming a price-to-earnings ratio of between 18 and 20, writes Bullish Cross author Andy Zaky, ignoring the sheer amount of cash Apple has, and a growth rate of 50 to 70 percent. Street consensus for October 2011 is limited to a stock price of about $332 to $350, and earnings per share of $17.50.
Apple should accumulate roughly $18 billion in cash in 2011, Zaky estimates, on top of the $45.8 billion it already has in savings. Using this assumption, and a prediction of $20 in EPS, brings about the $380-400 stock figure for the end of the next fiscal year. If the market was fully aware of Apple's cash levels and growth rate, Zaky suggests, shares would actually be poised to reach as much as $600 based on a 30x P/E ratio.
"Theoretically, Apple should have traded at a 50 P/E over the past five years, but has only seen that valuation level for only a few moments," he comments. Apple is expected to hold onto P/E ratios between 18 and 22 for the foreseeable future, based on the company's past track record. In terms of growth, the company should advance at rates between 25 and 30 percent for the next five years, and soon become the largest company in the US in terms of market capitalization.
Grizzled Veteran
Joined: Oct 1999
Optimistic
This optimism is heavily contingent on one over-riding factor. Right or wrong, Apple's value is irredeemably linked to the presence of Steve Jobs. If and when Steve withdraws from daily operations or worse still, dies suddenly, the share price will tank heavily. This spectre is what haunts Apple's share price and market cap.