Analysts don't want to be too high with Apple (and a few other stocks). There's a belief that if you are outside the average and you overstay it, you are a suckup to that company, trying to make money. As it stands right now Apple over performs almost every time. That means stock price will factor in higher than average performances. Good info to know...
It’s hard to predict for a number of reasons. These are odd times, to say the least. With revenue being a bit over $59 billion a year ago, estimating anything in the mid $70 billion range is already a huge bump. How much higher to go than that? I don’t think anyone can really get that right.
The law of large numbers doesn’t seem to be in play with Apple.
Here’s what I wrote about that in late 2015… (Still long and strong in the stock, though I did sell some shares in early 2020 to jump aboard Tesla.)
Law of Large Numbers Debunked
Among the arguments why Apple shares cannot outperform the market or its peers has been the oft repeated law of large numbers; the claim that Apple is too big to meaningfully grow and that its market cap, at over $600 billion, is so big that there aren't enough investment dollars to move the needle.
But the most recent [October 2015] earnings unwittingly provided an irrefutable counter argument by taking the combined market caps of GOOGL and AMZN to $800 billion. The market seems to have no trouble adding $80 billion to these two companies, whose combined profits are a fraction of Apple's, but won't allow the same for a single company. It was Microsoft's year 2000 valuation, north of $600 billion at the peak of the dotcom bubble and stagnant for the decade thereafter, that has since been used as the poster child for what happens to the company with the world's highest market cap. The street is convinced that will be Apple's fate.
What the market doesn't seem to understand is that vertically integrated Apple, in terms of the profits it generates and markets it addresses, is equivalent to the entire PC industry of the 1990s, including MSFT, Sony, Toshiba, IBM's PC division, Compaq, HP, and all the other PC makers. Adjusted for inflation, MSFT's year 2000 valuation alone would today be $850 billion, against Apple's current $650 billion. How much higher when you add in all the PC makers from 2000?
Apple's market cap, given the scope of its business, and adjusted for inflation, is very conservative. As usual, the market is wrong.
Well… sort of. Analysts do want to be as accurate as possible because their reputations depend on it. But, they also don’t want to stick out too far from the crowd either on the up side, or the down side, because the chance of being more accurate isn’t that big really, and the chance of being wrong by a lot is much greater. That’s worse. Do that a few times, and no one will pay you any attention. This quarter’s win caught everyone by surprise, including me, and I’m usually pretty good with this. But these guys have to go be second hand info through the back door. It’s difficult.
the law of large numbers as referred to Apple means sales and profits, not company valuation. It was referenced to Apple’s future possibility of growth.
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the law of large numbers as referred to Apple means sales and profits, not company valuation. It was referenced to Apple’s future possibility of growth.