Apple: The $1 Trillion Company?
By Steven Russolillo
Apple’s meteoric rise is far from over.
Piper Jaffray analyst Gene Munster predicts Apple shares will reach $1,000 in 2014 and become the first company ever to have a $1 trillion market capitalization. Putting aside excessive investor exuberance, “we believe the real story is earnings growth,” Munster says.
Apple shares jumped 1.8% to $630 minutes after the opening bell and set another all-time high. The stock is up 56% this year and has a market cap of about $587 billion, according to FactSet data.
“Despite the law of large numbers, we believe the opportunity in mobile devices (iPhone and iPad) are big enough for Apple [to] grow earnings by 20% plus over the next three years,” Munster says.
He also points out 45% of iPhones sold through 2015 are “in the bag.” He bases his prediction on average iPhone life and user upgrade rates.
Apple fever has been in full bloom this week. Yesterday, Brian White of Topeka Capital Markets launched coverage of Apple with a four-digit price target: $1,001.00. He said he sees “no end in sight” to all the bullishness surrounding the company.
Munster, however, points out what could go wrong.
“The key risk to the Apple story is pace of innovation,” he says. “While we have not seen anything to make us believe innovation will slow, it is the fundamental barrier that stands between shares at $600 and $1,000.”
That said, the pros largely outweigh the cons at this stage of Apple’s game, he says. Here’s the kicker.
“While it seems virtually every investor (professional and retail) and analyst has something positive to say about Apple, the multiple on shares does not suggest there is excessive investor exuberance,” Munster says.