Saturday, April 28, 2012

Will Apple become the first trillion-dollar company?

Apple stock is flying high, although since its boffo fiscal Q2 2012 (calendar year Q1 2012) earnings results the stock has been pretty stagnant (the stock had fallen some 70 points a peak of $636.23 on April 9 before the earnings release, and now sits slightly above $600). With a market cap of $564.38B as the world's most valuable company, Apple is far below where Topeka Capital Markets analyst Brian White believes it will end up: a trillion dollars sometime in 2013.

White already shocked the business world when, in early April, he set a price target of $1,001 for Apple (AAPL, NASDAQ) stock. Now he's gone still further, setting a target of $1,111 per share after the Apple earnings release earlier this week.

Since a price of $1,072 a share would value Apple at $1 trillion, by setting his price target even higher, White has predicted that Apple’s market capitalization will hit a trillion dollars sometime in 2013. That would be an unprecedented value for a company.

In his research note earlier this month, White said,

"Driven by an ever expanding portfolio of innovative products, a growing integrated digital grid, unmatched aesthetics and a brand that is able to touch the soul of consumers of all backgrounds, Apple fever is spreading like a wildfire around the world and we see no end in sight to this trend. As such, we believe the Apple story still has a long way to play out in the coming years and we expect the next 12-18 months to be particularly exciting for the Company on multiple fronts."

Now that Apple's fiscal Q2 2012 results were released, with the company making over $12 per share in net income, White has raised the bar still further, and said,

“Apple’s performance once again demonstrated how quickly Apple fever is spreading around the world, and this trend continues to drive meaningful upside in the company’s financial results. We believe the negative vibes that have held back the stock over the past couple of weeks will now be replaced with the fear of missing the next leg up in the stock price that we are forecasting will reach $1,111 over the next year.”

Is that possible? Apple's forecast for its fiscal Q3 2012 (calendar year Q2 2012) was down quite a bit from last quarter, about a third in terms of net income.

For one, White noted that “Apple is trading at just 8.1x (ex-cash) our [Topeka Capital Markets] CY13 EPS estimate."

In addition, there are a number of reasons that one might think a trillion dollar value is not out of reach, including iCloud, iPhone 5 and an expected Apple TV. There are also rumors of an iPad mini, and if Apple gets a relationship with China's largest wireless carrier, China Mobile in place, it could rapidly ramp up iPhone sales in that country.

$1,111 seems a long way away. However, on April 27, 2011, Apple's stock price closed at $350.15. Since then it's risen about 72 percent. A rise of 72 percent from now would be a price of about $1,040. So, it's a stretch, but not impossible, based on past history.

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