Apple Inc. (AAPL) can still hit the $1,000 share price mark and $1 trillion market capitalization by 2014 like analysts such as Piper Jeffray’s Gene Munster predicted earlier this year. There are several reasons that the technology giant’s share price has only stalled before it is poised to continue its rise much like Munster predicted.
Apple Has A Super Low PE Ratio
With Apple’s share price trading at the $615 range, the company’s Price Earnings Ratio (PE Ratio) is only 9 times this year’s estimated earnings for the company’s year that ends in September. This is well below the Nasdaq 100 PE Ratio or 11.2 and the S&P 500 index’s PE of 15.46. Using the Nasdaq 100′s price to earnings ratio alone would translate into a share price for Apple that is closer to $765. And, that price assumes that Apple does not deserve a premium to the average technology company. Is Apple a below average company with low growth potential? Of course it’s not, and it does not deserve the low valuation for its current and future earnings.
Huge Cash Hoard May Come Home
Apple continues to grow its cash hoard which is primarily held overseas from profits that the company has earned aboard. Instead of repatriating the over $110 billion the company holds overseas and pay taxes on the income in America, Apple continues to let the company sit idle. Eventually, stockholders could see legislation in Congress that allows multinational corporations like Apple who hold vast sums overseas to receive a tax holiday on returning the money to their American bank accounts which would let the companies buy back shares, increase dividends, and reinvest shares in the company.
Currently, Apple’s $110 billion cash equals about $117 per share. The company’s cash position is expected to grow to an estimated $205 billion or $213 per share by September 2014. These cash flow figures alone make Apple an attractive stock for the future. If the United States government does change its policy and tax laws, Apple’s stock along with many other companies could see quite a rise as well.
The Product Pipeline Is Huge
It might be more beneficial to thinking of Apple like a pharmaceutical company instead of technology brand. Like a drug manufacturer, the future of Apple is in its pipeline of future products. And, Apple has an incredible depth of product upgrades and new goods coming out in the near and long-term. Apple could see its share price spike considerably with the final introduction of the iTV. The company will also see considerable revenue increases from the iPhone 5, new iOS upgrades, new computers, and additional products that continue to increasingly creep into our lives.
Apple, Inc. can still reach the seemingly nosebleed share price of $1,000 and $1 trillion market capitalization. Apple has the potential to break the curse that has tormented other companies such as ExxonMobil (XOM), Microsoft (MSFT), General Electric (GE), and others who have either stalled or plummeted after reaching the $500 billion market capitalization mark. The company’s future pipeline of products, lower than average PE ratio, and stockpile of cash have Apple poised to continue its charge towards a share price of $1,000.
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{ 8 comments… read them below or add one }
There is no doubt that Apple can hit $1,000 milestone but it will take time. After Apple’s great win against Samsung, its share raised frequently but it did not helped over all market growth. I am agree with your all three reasons shared here but some more things played vital role in its growth.
Financial news recently posted..Basics of Reading Stocks
Apple can probably get to $1000 per share, but if I had to make a wager, I really doubt current shareholders who buy in here will be happy with their investment 10 years from now. I don’t think Apple’s valuation is necessarily sky-high, but anything can change in consumer technology – Apple is the leader right now, but not forever.
Apple is definitely a company that if you buy, you have to watch it like a hawk. Further losses of market share to Android devices could quickly erode the share price.
JT recently posted..Is Amazon More Expensive than Walmart?
I agree with JT here. Especially with the death of Jobs, who was really in the loop when it came to technology that consumers would want (and ultimately decide they need), I think there’s an opening for other companies – maybe even one that hasn’t been established yet – to come in and take a piece of the pie. Of course, that Samsung ruling won’t hurt Apple…
Elizabeth @ Simple Finance recently posted..Minimalism At Home: Do I Really Need Six Sets of Sheets?
I think Apple will split before the stock price hits $1,000. Could be a 2 for 1, but I think it will be more.
krantcents recently posted..Losing Is Winning
Not sure if they will split or not, but they might to make it more affordable for investors. I think they still have a great future ahead and agree with the point about the product pipeline. I feel like they’re just getting started.
I don’t think Apple’s valuation is necessarily sky-high, but anything can change in consumer technology – Apple is the leader right now, but not forever.
Yeah, I think that they could hit that amount. Simply put, they have awesome products. But I’ll stick to mutual funds so I don’t lose my lunch if Apple loses their grip on the consumer technology market.
Good post Hank. I don’t agree or disagree. I think the comment by treat fungus was right on.
Roger Wohlner recently posted..Friday Finance Links – August 31, 2012