Apple stock could hit $200 on unmatchable digital transformation to Services

Posted:
in General Discussion edited September 2020
Loup Ventures' Gene Munster has made a case for Apple stock shares hitting $200 in the next two to four years because the company is a "cornerstone of a new digital transformation."

Credit: Apple
Credit: Apple


In a note published on Wednesday, Loup Ventures analyst Gene Munster forecast that there is 50% upside to AAPL shares over the next two to four years. That's despite the fact that the move in AAPL's share price thus far -- more than 85% -- may "appear unsustainable."

According to Munster, the coronavirus pandemic has realized five years of tech adoption in just five months. The global health crisis has helped to usher in "a new digital transformation marked by accelerating adoption of various technologies."

"Apple is the cornerstone of this transformation. The company has paved a unique growth path with a combination of hardware, software, and services that its competitors cannot match. At the most basic level, our reliance on the company will continue to grow in the years to come," the analyst wrote.

Munster admits that a case for Apple's market capitalization exceeded $3.5 trillion in the next two to four years may seem even more "out of touch with reality."

While he called the magnitude of that number "mind-numbing" with no historical precedent, he also added that there's no precedent for the scale of tech adoption that's currently underway or for the reach and popularity of Apple's products. Although a COVID-19 vaccine or more effective treatments may slow this digital transformation, Munster contends that it's already underway.

Munster applied a 35x multiple on Loup Ventures' Apple earnings-per-share estimate of $5.50, reaching a share price of $200. That estimate is about 17% above Street estimates.

Although Apple hasn't traded at a 35x forward multiple since the iPod, and Munster said that revenue growth will likely stick closer to 10%, he justifies the high estimate.

"The underlying reliance the world will have on Apple products justifies, in our view, a multiple well above revenue and earnings growth rates," Munster wrote.

The analyst likens Apple's position to cornerstone companies like Coca Cola or Clorox, which see normalized growth rates in the single digits but can trade at double-digit multiples on next year's earnings.

Apple's hardware, software, and services are part of the foundation of the new and accelerating digital transformation, Munster said, adding that the company's best days are still ahead of it. Apple has an opportunity to capitalize on a multi-year 5G upgrade cycle with the "iPhone 12", healthcare-enabled wearables with the Apple Watch, augmented reality technology with Apple Glass, and artificial intelligence across its software.

"This may sound like buzzword bingo, but we believe it is a realistic assessment that Apple's best days are still ahead," the analyst concluded.

Loup Ventures last forecast that Apple had a "clear path" to a $3 trillion market cap on the basis of 5G and health technology. In May, Munster also said that Apple could "own the future" of personal computing with its augmented reality technology.

Comments

  • Reply 1 of 9
    Every year Apple’s user base grows, and Apple’s users are pretty sticky, buy new hardware every year or so, and the longer they are an Apple user the more sticky they get and the more hardware they buy. I wonder if Apple will continue the share buyback longterm.
  • Reply 2 of 9
    I’m pretty confident about the path their charting right now. Ignore the whiplash market reactions to the stock. Markets are erratic right now due to politics and Fed policies.
  • Reply 3 of 9
    This coming from the guy who predicted for years that the Apple TV was coming and would disrupt the TV industry. Even though Apple has no control of how it is valued, I don't think Apple has to do anything earth shattering to get to 2T or higher in the next 2 to 3 years, as long as they continue to refine their current products and come with a new nice one once in a while. Interestingly enough, nobody predicted Apple at 2T this year, mainly because the financial analysis industry is a sham, and Apple is always a miss-step away from "DOOM".
    SpamSandwich
  • Reply 4 of 9
    When the cheap purchasers realize that iPads are, kinda better in the long run than ChromeBooks, and Intel is stuck making a "Gold Standard x86_64" chip, with nothing else possible to do, i.e. the closest a "Too Big To Fail" company fails, and there is no where to go for x86_64 platform (2-4 years from now), the Apple Silicon MacBooks, finally with a lower price that can compete with ChromeBooks (around $499) start getting ordered, BALLGAME...

    One day when the world's purchase makers stop with the "Cheaper is Better", and the Intel chip crumbles, that will be that day!
    Fully functional iPad.
    Fully functional Mac.
    almost 90% web based ChromeBook?

    That's the crush everyone optimistic version.  ;)

    But beyond that just day to day operations, wearables, phones, services, etc will increase the evaluation for many years to come!
  • Reply 5 of 9
    Hmm... I am as AAPL rah-rah as they come, but this is already not aging well.

    $200 (post-split) will be tough. Very tough.
  • Reply 6 of 9
    wood1208wood1208 Posts: 2,561member
    After split, more retail investors can afford to own a piece of Apple co that will help drive Apple stock up along with increasing revenue.
  • Reply 7 of 9
    Hmm... I am as AAPL rah-rah as they come, but this is already not aging well.

    $200 (post-split) will be tough. Very tough.
    It’ll take a while, that’s very likely.
  • Reply 8 of 9
    I think we see 150 by Christmas. New Apple watches with pulse-ox built will be the covid Christmas present everyone will want.
  • Reply 9 of 9

    "The underlying reliance the world will have on Apple products justifies, in our view, a multiple well above revenue and earnings growth rates," Munster wrote.


    Breaking News.
    The USA isn't the world. There are huge parts of the world where Apple is just a bit part player.

    Apple is like many Tech Stocks IMHO totally overvalued. There is a tech stock bubble that will burst sooner or later.
    However, and unlike some of those Tech Stocks, the Apple CEO isnt' talking up the prospects of his company (and by implication the stock price) at every opportunity using Social Media.
    I am not an Analist and I don't have any direct holding in Apple so what do I know apart from having studied events like the South Sea Bubble.
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