The big jinx: Apple will be worth $1 trillion, says analyst

The big jinx: Apple will be worth $1 trillion, says analyst

Summary: Piper Jaffray analyst Gene Muster says Apple is worth a market cap of $1 trillion. Just another $400 billion to go.

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TOPICS: Apple
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Apple could be the first company worth $1 trillion in market capitalization as shares hit $1,000, according to Piper Jaffray analyst Gene Munster.

Somehow it's unlikely that Apple CEO Tim Cook is sending Munster any thank you notes. After all, we've seen these wild market calls before. Dow Jones Industrial Average at 25,000? Sure why not? All those dot-com stocks justified to the stratosphere in 2000. Magazine covers proclaiming bear and bull markets. You know the drill. One huge call can signal the end.

Rest assured Munster has more fundamental data backing him up. Apple is running on all cylinders---iPhones, iPads, Macs, iPods oh my. Munster outlines the case:

We believe shares of Apple will reach $1,000 in CY14, which would imply a roughly 1 trillion dollar market cap, the first in history. While some investors believe the biggest issue for Apple to get to $1,000 is the market cap along with excessive investor exuberance, which we address in this note, we believe the real story is earnings growth. Fundamentally, we believe shares can reach $1,000 based on our belief Apple will continue to win in global mobile devices. As a result, we remain confident in our $80.18 CY15 estimate. A 12x multiple (stock's current out year EPS multiple) on our CY15 EPS of $80.18 yields $960; however, this excludes an Apple Television, which we believe could add more than $4 in EPS (5%) by CY15, which would yield over a $1,000 share price (12 * ~$84).

Sounds logical right? All Apple needs is another $400 billion in market cap.

Apple's last 15 years: $1,000 or bust?

Munster said that $400 billion in market value can come from the following:

  • A third of iPhone upgrades are in the bag through 2015.
  • iPhone owners upgrade every 21 months on average.
  • Apple today is valued fairly even at $1 trillion in market cap---12 times earnings, which happen to be growing at a 20 percent clip going forward.

The wild card for Munster's $1 trillion Apple dream is innovation. Munster said:

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 at $1,000. Apple has won the ecosystem and interface war, and must continue to innovate around its leadership position to grow the business. Going forward, consumer interest in owning future Apple products is a key metric to measuring Apple’s pace of innovation.

There's another concern here. Munster just jinxed Apple with his headline grabbing $1 trillion market cap call. Microsoft hit the market cap record with a value of $619 billion in 1999. There were wild market cap projections then too. That market cap peak didn't turn out so hot for Microsoft, which is incidentally worth $276.5 billion today.

Topic: Apple

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51 comments
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  • While there's plenty of innovation coming from Apple...

    I can't see much coming from other hi-tech companies, only copying.
    While I'm not too sure Apple will reach that $1 trillion market cap, they are certainly the only company in the tech sector which has a prayer to accomplish this.
    Mikael_z
    • This sounds like a way to attempt to get the stock to rise

      as orthers are questioning what the future holds for Apple.

      This is based on too many "IF's", and I really can't say that I would agree with Gene Muster on this, as he does tend to overrate tech stocks at times.
      William Farrel
      • Questioning what the future holds for Apple?

        Others have been questioning Apple's future since those "beleaguered" days in the mid 90's. But we know how it all turned out no? The CEO of Dell famously recommended shutting down the company and giving the money back to the shareholders back then. Wall Street have never quite understood Apple, and the way the company works. Any slight negative news or false rumor that turned out to be (false) will send the stock nosediving quickly. All Apple could do is continue innovating and continue disrupting markets. This formula have worked greatly for them and I don't see them letting up anytime soon.

        For instance, I expect a complete redesign of the next gen iPhone (5), which will probably easily break sales records. Pent up demand for a redesign, larger screen etc. Everyone seem to be waiting for Apple to push the magic button with TVs so they can follow suit. The iPad has been a phenomenal success and they've just scratch the surface of where they want to go with such a "post-pc" device. MacBook Air are selling like crazy and everyone seem to be following suit again with their clones, Ultrabooks. Apple has the largest most respected ecosystem, App Store, iTunes, they're the worlds most valuable company (since passing Exxon), number one brand, world most admired company....How could anyone with a straight face question the future direction of this company.
        dave95.
      • Yes, questioning

        Even Apple is questioning the future of the MacBook Pro, and other lines, so yes they have concerns themselves

        They know the future is harder, and have raised their own concerns on that subject. The big thing now is to get supply lines even cheaper, as how many tablets will people buy, over and over again when you run out of things to throw in them?

        Who would have guessed that iPod sales would have dropped the last few years? But it's real.

        So yes, alot of questions remain, and Apple is well aware of them. They'd be foolish to ignore them. Sony was the "could do no wrong" poster child for years.

        Look at them now.
        William Farrel
      • Windows 8 will break sales records

        "For instance, I expect a complete redesign of the next gen iPhone (5), which will probably easily break sales records."

        Vista broke sales records. When you monopolize a market, everything you release breaks sales records. So yes, I expect that every single iPhone and iPad that Apple releases for quite a while will break sales records. The first time that Apple fails to break a sales record with a new release is the sign of big trouble in Cupertino.
        toddbottom3
      • @William Farrell

        How do you know Apple is questioning the future of the MacBook Pro?

        They are moving toward puny ARM processors, which are good for content consumption but pitiful for content creation, and plenty of their customers (FWIW) are still content creators.

        I still see Intel in Apple's future, for MacBooks, just not as many.

        And as much as I prefer OS X, if Apple goes all-ARM or their own customized version of that processor, I will want to see real benchmarks competing against Ivy Bridge or whatever will be Intel's line-up at the time. I may not like Windows, but with enough RAM and knowing how to do simple upkeep, the power will eventually supersede a pretty case with feeble hardware inside. A brand is more than the logo, and only feeble and unethical brands would hype up the superficial at the expense of all else.

        Still, you sound more certain - maybe there's an article you had read that the rest of us hadn't...
        HypnoToad72
      • HypnoToad72, do a search on that

        as when I try to add the link here, it won't post.

        Seems Apple is questioning their line of Mac Pro line of computers, including the MacBook Pro line of computers, too. Add to that the stock buy back.

        Sure, a company can buy back stock as they feel it will rise even higher in the future, and resell them at a higher price without diluting the company.

        But at the same time they may feel that the stock price will stagnate, thereby raising the ramaining stock price because the remaining shares are less diluted - Happy investors.

        Or it could mean nothing at all, and the "what is the future of the Mac" could just be rumors, nothing more.
        William Farrel
      • Apple guess early the iPod sales would drop....

        @Willian F.

        When they introduced their iPhone with an iPod app in the market. They saw early the direction the world was heading and jumped on it before someone else did (think Sony asleep while iPod kick but). Apple was willing to eat their own when they introduced the iPhone and then the iPod Touch.

        I also remember some wondering how many ways can Apple redefine the iPod lines. How many iPod can people buy over and over again? How many revisions did we have over a decade later? The iPad I see as the future of computing for the gen consumer, not just some dedicated mp3 player. I could easily see it shattering all sales record and lasting well past a decade.

        Is anyone buying desktop towers these days? So Apple is no exception. Millions have been transitioning to notebooks like the MacBooks and Airs. And Apple is selling record sales there.
        dave95.
  • Hey, how much is Microsoft worth?

    Steve Cook should just buy them up, fire Ballmer and resurrect this joke from the ashes.
    Pete&Pete
    • Just for future reference

      When MS's market cap was many times that of Apple's, did that mean that Apple was a joke?

      I just want to try and figure out the rules for when market cap "counts" and when it doesn't.
      toddbottom3
      • Market Cap is a number like market share I don't consider

        all that important. It's nice when the company you support is doing well and all the stories verify that simple fact but no as far as I'm concerned the rules don't change with the company name and no this is not all that important too me at least. What is important is a good solid game plan. Not jumping into say the commodity business to gain volume at the expense of profit for instance. Selling one's goods at a good healthy profit and then making even more money with after sales revenues from say your on-line store like iTunes for instance. Not selling a given product at a loss and planning on making it back on sales to that product. After all why not make money on both ends? The inistial sale and then sales to the product or user as it were?

        Pagan jim
        James Quinn
  • The big jinx: Apple will be worth $1 trillion, says analyst

    Gene Munster needs to be investigated by SEC for trying to artificially boost Apple's stock. He seems to be doing the pump and dump scam. I hope the SEC goes after him.
    Loverock Davidson-
    • I agree

      100% every blog, interview analysis of his by Apple is to prop them up. Also look at his comments and analysis about Apple's competition.

      I agree I so wish the SEC would investigate him. Nothing but pure stock manipulation.
      jonandkelly
      • Mr. Munster

        Well... alternate reading Munster and Henry Blodget to gain a balanced appreciation for what isn't happening.

        I'm surprised Munster went to that number without invoking his bete blanc, the Apple TV.
        DannyO_0x98
    • Munster is meaningless...

      No one, repeat, no one cares what Piper Jaffray has to say.
      hawks5999
  • Apple nearly Maxed out

    The IPad 3 is basically the same as the original IPad, with better internals.
    The iPhone 4s is basically the same as the orignal iPhone, with better internals.

    Right now, Apple is riding a wave of past success. But how many times can you introduce a 'retina' display? At some point, Apple is going to have to deliver a new product to the market to maintain it's stock price. Apple's profits are basically coming from two products. Neither of those products has seen significant innovation (beyond some hardware tweaks) since they were introduced.

    Without a compelling new product, I don't see how Apple can push their stock price much higher. (And no, I'm not sold on Apple TV). Short term hold, long term sell.
    retnep
    • The other problem is the "M" word

      iPad is a monopoly. iPod is a monopoly. iPhone is pretty much a monopoly, Apple just needs to drive out a couple stragglers in the market. When the anti-trust authorities start thinking of ways to impede the market leader so the market stragglers can catch up (like they did to Microsoft so that Apple could catch up) then we will see the stock price drop. Already the anti-trust authorities are looking into Apple about book publishing and Apple is SCARED.

      I don't want Apple to be investigated, I don't want Apple to be dragged down so that others can catch up. Then again, I didn't want Microsoft to be dragged down so that Apple and Linux could catch up. It seems silly that companies like Apple and Microsoft shouldn't be allowed to release their best products just because there is fear that the others can't compete with the best. But that's just the way it is. As consumers, it makes me sad because we have been denied the best that Microsoft had to offer. It would make me sad to be denied the best that Apple had to offer just because they monopolize 3 markets.
      toddbottom3
      • Those ust be some strong Meds you're on...

        Having a Monopoly position is not against the law, unless you act like Microsoft. Microsoft was never prosecuted for having a monopoly. They were, however. prosecuted for abusing their monopoly position. Some of Microsoft's monopoly power was from misrepresenting their market power. Microsoft was famous for counting licenses multiple times to pump up their marketshare. If you worked in IT during the 90's you saw it firsthand:
        Company "X" orders 500 Dell PCs. The agreement covers x computers a month, by y months. Microsoft offers a "site license" but this requires the Dells to be wiped and have a different version of Windows installed (to stay in compliance). Now for manufacturing the company has three shifts of between 175 to 280 workers. Give that the manufacturing floor has a PC at each workstation, we're talking 300 just for that, but since each shift is not going to switch out computers, the employees just use a separate profile. Microsoft understand a lot about seat licenses and each profile is considered a seat. Thus Microsoft charges per employee. While the seat license is lower than a retail copy of (at the time XP Pro) it is different than the home license that came from Dell, because no PC was allowed to ship without vaid license for Windows. But here's where it get's interesting: each XP Home license was activated, at Dell, as if the computer was actively in use, while that XP Home license was never booted into, but rather the Hard Drive was pulled and a Site licensed Hard Drive was installed. Every so often the Hard Drive would be "re-imaged", but Microsoft would only allow this so many times, before they required a new license.
        Jumpin Jack Flash
      • ?

        What's sad is that the best Apple has to offer has been CLEARLY inferior to what other top electronic companies offer for some time now, but consumers STILL choose Apple's products based on the logo alone. Apple's astronomical profits should be the result of innovation and top-notch products, not a senseless cult following.
        trob6969
      • @ trob6969

        So you suggest that all people who buy Apple products are brainwashed idiots???

        Apparently, Apple offers great value with their products. Their competitors don't like it, but then, none of their "competitors" are really competing with Apple, or even having comparable products.

        A computer is not just a pile of components.
        danbi