Friday, May 13, 2011

Will Apple be Worth $2 Trillion?

nteresting comments this week from both Cody Willard and James Altucher that Apple (AAPL) could be worth $1 Trillion if not $2 Trillion in the future. While this might seem like crazy 2000 internet bubble like forecasts, its refreshing to see investors willing to discuss the potential of the greatest retail/tech stock in the world. Not to mention as the market heads to record earnings, it should also see companies with record market caps. At some point it was crazy to think a company could be worth $100B so its inevitable that somebody will hit $1T and AAPL is the likely winner.

As I recently wrote, the market continues to give AAPL a very cheap valuation compared to its growth rate. Most analysts continue to give them valuations x amount above the current price in the $340 range. They throw out $400-500 targets even though it gives AAPL an unreasonably cheap valuation. They never seem capable of forecasting a value other then based on the current value whether expensive or cheap, hence the typical problem with analysts and the momentum investing in the market.

Its refreshing that both Cody and James have come out with valuations based on the growth rate and potential of the AAPL franchise. Note that Cody's estimate comes out to $2000 a share.

Note that we had highlighted an article last year that forecasted the potential of AAPL getting to $1000. Personally I'd take $1000 at this point as the market continues to get trapped by the concept that AAPL is too big to keep growing.

Below are the 3 reasons Cody believes AAPL can get to $2000:

1. Apple’s trading at less than 8x next year’s $30 per share in earnings when you include the $50BB plus in net cash the company has.
2. The products are the highest quality out there and nobody can catch that, not Google, not Softee, not Sony. Not nobody.

3. The platform that Apple has locked people into is the key….almost everybody who is now using iTunes will still be using iTunes in five years, the people nurtured on iPhones 1-5 will still be using iPhones #15-20 in 10 year, and everybody using facetime will still be using facetime, and you’ll be doing so much more inside that platform/eco-system that apple’s created. And that’s the real key. And it’s not about 2011 anyway. It’s about 2021 when you live surrounded by iOS in your home, your car, your office, your gadgets.


Disclosure: Long AAPL in client and personal accounts. Please review the disclaimer page. 


No comments: