Apple has a clear path to a $3 trillion market cap, says Gene Munster

Posted:
in General Discussion edited January 2021
Loup Ventures' Gene Munster believes that digital acceleration, the iPhone 12, and other factors could drive Apple stock to a $200 price per share and a $3 trillion market capitalization.

Credit: WikiCommons
Credit: WikiCommons


In a research note seen by AppleInsider, Loup Ventures analyst Gene Munster points out that the venture capital firm made similar predictions in 2019 and 2020. In the latter year, Apple grew 83%, outpacing the other so-called FAANG stocks.

For the 2021 calendar year, Munster is again forecasting that Apple will outperform heavy hitters like Amazon, Google, Facebook, and Netflix. More than that, "over the next couple years," the analyst believes Apple has a clear path to a $200 share price. That would put its market valuation to a number eclipsing $3 trillion.

That prediction is based on several factors, including an accelerating digital transformation due to the ongoing coronavirus pandemic. Although the rate of adoption may ease, Munster sees much of the change as sustainable in a post-pandemic world.

"For example, we estimate the percentage of US knowledge workers working remotely will settle long term at a level 3x greater than before the pandemic," Munster writes.

Apple, the analyst contends, is the cornerstone of this shift to a digital environment because of its blend of hardware, software, and services "that its competitors cannot match in terms of reach or popularity."

Munster points to the 20% to 40% growth in both the Mac and iPad business in the June and September quarters of 2020 after years of flattish growth. "In short, our reliance on the company will continue to grow in the years to come," the analyst adds.

Loup Ventures also expects the iPhone 12 and iPhone 12 Pro cycle to become Apple's strongest since the iPhone 6. Munster believes the catalyst for this growth cycle to be 5G. Although 5G will be a boon to technologies beyond smartphones, the handset market will be among the first to see a consumer spending bump.

"While we expect limited 5G network coverage in the US will initially temper consumer demand for iPhone 5G in the front half of 2021, as 5G coverage and performance improves in the back half of the year, we believe it will spur a multiyear iPhone upgrade cycle versus the typical one-year cycle," Munster says.

Stating in 2022, Munster forecasts that Apple is positioned to have two to three years of 5% to 10% annual iPhone revenue growth.

Additionally, the analyst believes Apple's stock price will be rewarded by anticipation and rumors of new business segments.

That includes expanded hardware subscription offerings, which Loup Ventures thinks could culminate in a "360 bundle" that would offer a mix of hardware, services, and software at a single monthly price.

"Today, about 55% of the company's revenue can be purchased as a subscription. By adding Mac, iPad, and Watch subscriptions, that number would approach 85%," the analyst says.

Rumors of an "Apple Car" or Apple automotive technology could also be a boon to the company's share price. Munster believes the Cupertino tech giant is well-positioned to contribute to the auto industry because of its differentiated technology in silicon, software, batteries, AI, and cameras.

The addressable market of the transportation industry is also massive. "Assuming over 80m cars are sold annually at an ASP of $25,000, global auto is a $2T market. For perspective, Apple's expected revenue for the current fiscal year is $315B," Munster points out.

Although an "Apple Car" isn't likely to debut before 2024, investor optimism regarding Apple's entry into the auto market could increase in 2021.

Munster writes that Wall Street's 2021 AAPL revenue growth estimates of 15% are in-line with Loup Ventures expectations, but he adds that consensus estimates for 2022 revenue growth of 5% year-over-year are too low. He believes 2022 revenue growth will be closer to 10%.

The analyst is predicting that shares of AAPL will reach a $200 price per share over "the next couple years," representing a 50% upside from current levels. The price target is based on a 35x multiple on Loup Ventures' 2022 earnings-per-share estimate of $5.70.

Comments

  • Reply 1 of 11
    At some point, what can you practically use the largest market cap in the world for that doesn't put you in the crosshairs of governments for breakup, if only to keep you from becoming too powerful to keep under reasonable control for said governments? Big money can have outsized effects when aimed at goals chosen by those not chosen by the people of the relevant jurisdiction.
    watto_cobra
  • Reply 2 of 11
    lkrupplkrupp Posts: 10,557member
    In my opinion Apple is finally starting to leave the traditionalists behind, those who still cling to the powerful desktop paradigm. More and more computing power will be moving online with physical devices becoming simple interface appliances. For forty years the personal computer industry has struggled to make the computer an easy to use appliance but have failed miserably. Even with the GUI and now touch screens the common user is completely flabbergasted and helpless. This is easily seen by visiting the support sites of various platforms to witness users that need their hands held to accomplish simple tasks.

    With the move to ASi Macs with single SoC systems the much derided iPadification of the Mac has begun. Mark my words, touch interfaces are next for the Mac. Big Iron in the cloud will do the heavy lifting for tasks the desktop monster has traditionally done. 

    To repeat, this is my personal opinion and not worth a tinker's damn, but I see Apple moving quickly  and predict the first ASi iMac will be a sealed system like the M1 Mac Mini with no upgrade capabilities. The traditionalists will go batshit crazy and some will proudly announce they are leaving Apple’s platform for good. Fine, but watch as the other platforms follow suit in short order. 

    Apple will be the platform for the rest of us once again, nerds be damned.
    edited January 2021 watto_cobra
  • Reply 3 of 11
    sflocalsflocal Posts: 6,123member
    Why do people still give that mouthpiece Munster any more news time?
  • Reply 4 of 11
    sflocalsflocal Posts: 6,123member
    At some point, what can you practically use the largest market cap in the world for that doesn't put you in the crosshairs of governments for breakup, if only to keep you from becoming too powerful to keep under reasonable control for said governments? Big money can have outsized effects when aimed at goals chosen by those not chosen by the people of the relevant jurisdiction.
    *yawn*
    blastdoorwatto_cobra
  • Reply 5 of 11
    Assuming a forward PE ratio of 30x (which lots of people -- rightly -- think is rather high), Apple will need $100B in earnings in a few years' time.

    Possible? Yes. Tough? Yes.
  • Reply 6 of 11
    blastdoorblastdoor Posts: 3,531member
    Assuming a forward PE ratio of 30x (which lots of people -- rightly -- think is rather high), Apple will need $100B in earnings in a few years' time.

    Possible? Yes. Tough? Yes.
    Nicely summarized, I agree.

    Apple has great technology, leadership, employees, products, services, R&D, etc. It's just an amazing company. I'm especially excited by ASi, not just for the chips and the products they enable, but wha the existence of ASi in Macs says about Apple's commitment to the Mac and general vision for the future. 

    The stock price, though, is another issue entirely. I'm worried about a speculative bubble in the stock market more generally. That bubble is being inflated by two huge macro issues related to COVID -- easy money from the Fed (which is appropriate for our current circumstances) and a very high savings rate among consumers. As soon as COVID ends, savings rates will fall as people go on a spending splurge. That surge in consumer spending might spook the Fed, leading to higher interest rates. So there you have two big forces taking money out of the stock market -- people spending rather than saving and some savers opting for interest-bearing assets rather than stocks. In other words -- a giant sucking sound in the stock market that will lower all boats, including AAPL. 

    But if that happens, I'll view it as a great opportunity to buy AAPL. 
    watto_cobra
  • Reply 7 of 11
    cg27cg27 Posts: 221member
    blastdoor said:
    Assuming a forward PE ratio of 30x (which lots of people -- rightly -- think is rather high), Apple will need $100B in earnings in a few years' time.

    Possible? Yes. Tough? Yes.
    Nicely summarized, I agree.

    Apple has great technology, leadership, employees, products, services, R&D, etc. It's just an amazing company. I'm especially excited by ASi, not just for the chips and the products they enable, but wha the existence of ASi in Macs says about Apple's commitment to the Mac and general vision for the future. 

    The stock price, though, is another issue entirely. I'm worried about a speculative bubble in the stock market more generally. That bubble is being inflated by two huge macro issues related to COVID -- easy money from the Fed (which is appropriate for our current circumstances) and a very high savings rate among consumers. As soon as COVID ends, savings rates will fall as people go on a spending splurge. That surge in consumer spending might spook the Fed, leading to higher interest rates. So there you have two big forces taking money out of the stock market -- people spending rather than saving and some savers opting for interest-bearing assets rather than stocks. In other words -- a giant sucking sound in the stock market that will lower all boats, including AAPL. 

    But if that happens, I'll view it as a great opportunity to buy AAPL.


    I agree except that consumers splurging will only help AAPL, so rather than waiting out an upgrade to their iPhone, AppleWatch, iPad, Mac, etc they’re going to go for it once the coast is clear.  I think there is more pent up demand for upgrades than even Munster realizes.
    watto_cobra
  • Reply 8 of 11
    SpamSandwichSpamSandwich Posts: 33,407member
    Shut up, Gene.

    Every time he talks their stock gets killed.
  • Reply 9 of 11
    crowleycrowley Posts: 10,453member
    Assuming a forward PE ratio of 30x (which lots of people -- rightly -- think is rather high), Apple will need $100B in earnings in a few years' time.

    Possible? Yes. Tough? Yes.
    Apple has $100bn/year in earnings already?

    https://www.macrotrends.net/stocks/charts/AAPL/apple/gross-profit


    EDIT: Oh wait, you mean net I guess.  Yes, that's quite a tall order.
    edited January 2021
  • Reply 10 of 11
    sflocal said:
    At some point, what can you practically use the largest market cap in the world for that doesn't put you in the crosshairs of governments for breakup, if only to keep you from becoming too powerful to keep under reasonable control for said governments? Big money can have outsized effects when aimed at goals chosen by those not chosen by the people of the relevant jurisdiction.
    *yawn*
    /sticks an ornery cat in the mouth of someone that opened their mouth and had nothing to say
  • Reply 11 of 11
    $3T?  We're already 73% of the way there, and a 36% rise in the stock price will get us there.  Today was a profit taking setback.  I am of two minds when I hear these prognosticators...
    The first is that they are investors trying to drive the price up, and the other is that they're short sellers trying to drive the price down, so they can cover their sell, and then re-buy at the lower price.
    watto_cobra
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