updated 11:00 am EDT, Tue April 3, 2012
Apple could be first company with $1T market cap
Two analysts have set record high price targets for Apple stock. Topeka Capital Markets' Brian White is in fact calling for a $1,001 target, based on several factors. "Apple fever is spreading like a wildfire around the world and we see no end in sight to this trend," he claims in a recent memo.
He suggests, for instance, that Apple is the "premiere" contender in 4G devices, with the LTE iPad foreshadowing an LTE iPhone. China is expected to become a major contributor to the company's profits, particularly because of the iPhone. China Telecom recently became the second Chinese iPhone carrier, and White sees China Mobile -- the country's largest carrier, with a 66 percent marketshare -- joining in within the next year.
The analyst also supports the idea of a full-scale Apple TV set. "In our view, the recent launch of the new 1080p Apple TV with a refined user interface is another step down the road toward Apple unveiling a full blown TV in the future," he writes. "Apple’s digital grid is tough to match and iCloud further strengthens this ecosystem, however, Apple is missing an important product and that is a full blown TV."
Piper Jaffray analyst Gene Munster has raised his price target from $718 to $910, estimating that Apple could hit the $1,000 market in 2014. He remarks that if Apple does reach that figure, it could give the company a $1 trillion market cap, "the first in history." He argues that worries about "excessive investor exuberance" are less an issue than where the extra $400 billion in market cap might come from.
Some of this could come from a predicted 5 percent-per-year rise in US tech company investments during the next three years. Apple is seen as potentially taking half of that market cap increase, down from 84 percent of cap increase during the past four years. More help could come from income funds -- Munster suggests 5 to 10 percent -- but a great portion could theoretically come from Apple's 10 "most relevant" competitors, including the likes of Samsung, HTC, RIM, Nokia, Google, and Microsoft. Together the companies are already said to have a $1 trillion market cap, and if 20 percent of it shifts over by 2014, Apple could gain $200 billion in value from that alone.
"At a $1,000 share price (roughly $1 trillion in market cap) Apple would represent 26 percent of the total US tech market cap from 17 percent today," says Munster. The earnings to support Apple's market cap are expected to come from growing smartphone marketshare and simply holding onto its tablet share.
"For CY12, we expect $44.76 in EPS, 27 percent y/y growth. For CY15, we expect $80.18, 23 percent y/y. The most important market is the smartphone market, where we estimate Apple had 19 percent share last year, which we expect to go to 33 percent in CY15, with ASP’s going from ~$580 in CY11 to an estimated ~$435 in CY15," writes Munster. "Moving forward, we believe the smarpthone market is boiling down to essentially two players at scale: Apple and Samsung...[an] ultimate shift of the third generation iPad to a $399 price point in CY13 after the fourth generation iPad is released should enable the company to sell a tablet with a retina-display screen for under $400. Second, we believe that Apple will launch an iPad with a smaller screen at a sub-$300 price point. Given our iPad sales assumptions, we believe that Apple will have 60 percent tablet market share in CY13 from 64 percent in CY12. We believe Apple will have 55 percent market share in CY14 and 60 percent share in CY15. The reason we expect growth/share to accelerate in CY15 is that we believe the iPad will become more widespread as both an enterprise and education device."
Like White, Munster expects Apple to build a TV set. He proposes that Apple could add $4 to $80 in 2015 EPS through the set, but isn't including that in his official financial models.