“Activist Investor Carl Icahn thinks Apple Inc is already worth over $1 trillion but others on Wall St. think it will take a few more years for the iPhone maker’s stock value to get there,” Noel Randewich reports for Reuters.
“With Apple’s stock market value ballooning this week beyond $700 billion, larger than Switzerland’s gross domestic product, activist investor Icahn said the technology company’s shares should be trading at $216 apiece, equivalent to a market capitalization of about $1.26 trillion,” Randewich reports. “‘It wouldn’t be outlandish for them to be at a $1 trillion market cap now,’ said Mark Mulholland, a portfolio manager whose Matthew 25 fund is among the best performing large-cap funds over the last five years. But like other portfolio managers consulted by Reuters, Mulholland believes it will more likely take two or three years to reach that level.”
“Wall Street appears sanguine in the short term,” Randewich reports. “After Apple trampled Wall Street’s expectations for quarterly earnings in January with record iPhone sales, stock market analysts increased their 12-month stock price targets. Their median average target price is now $134, which is a mere 6 percent higher than Thursday’s price and much less than what Icahn says it should be.”
Read more in the full article here.
Wall Street sheep (otherwise called analysts) know nothing. They all react after the event (75 million iPhones in 3 months), so they all adjust their prices up cautiously. Truth is Hedge funds, managed by the likes of Icahn, actually make money on Wall Street and understand the full potential of Apple inc., including the potential for further buyback.
Are they measuring weeks or months in years now? 🙂
Years away or never. Wall Street giveth and Wall Street taketh away. Just as Wall Street uses reasons to keep Apple’s P/E at a lower level than Microsoft, I’m sure they can force it even lower. Microsoft shareholders got lucky back in 1999 when the whole stock market was on fire for anything tech. Apple shareholders aren’t going to get that sort of tailwind because everyone seems to be cautious about investing in Apple. Apple will certainly never get a P/E of 77 and may never reach a P/E of 19. Only time will tell. Because there is no fixed metric for share value, Apple will likely have to boost revenue and profits to extremely high levels to become a trillion dollar company.
Carl Icahn’s blatherings mean very little although some of what he says of comparing Apple’s lower value to other companies is simply frustrating for shareholders to hear.
to: Macnificentseven48.
Microsoft “got lucky” long before the 1999 bubble in fiber optic companies. In 1992 Apple attorneys botched the wording of the licensing agreement with MS, allowing them to copy the mac interface. MS had better attorneys. As a result, MS zoomed in 1993-94. But Apple had (and has) better visionaries. Better programmers. Better designers.
What are you going to do when Apple has repurchased half of their stock? Then you might see 77 p/e, as people realize they might not be able to get it at all.
Buy now and avoid the rush!
I do not expect to see a P/E anywhere close to 77 for AAPL. Stock buybacks will compensate for employee stock awards and may even reduce the number of outstanding shares by up to 10% or so. But that will not likely change the P/E much at all. The P/E is driven by earnings and growth – expectations for *future* earnings and growth, in particular. For years, analysts have generally underestimated and downplayed Apple’s ability to grow revenues and earnings, always expecting competition to reduce ASPs, gross margins, and unit sales. Many people also repeated “common knowledge” such as the law of large numbers and the idea that Apple was no longer an engine of innovation.
But Apple’s P/E might gradually increase towards the S&P norm, which woud represent a substantial increase in share price and market cap.
Why the down votes? Macnificentseven48 is right.
If the AppleWatch is a hit, this could lead to a stunning advance. I believe this is why Apple is moving up now. In part, it is discounting a successful launch of the time piece. There are a lot of very good reasons why the stock is startlingly cheap. Thought for the day- If you have your money in a hedge fund, you can sell it all and put the money into Apple. You will lower your fees and sharply increase your profits. Buy now and avoid the rush.
I could be wrong, I could be right.
…but, then again… 😀
Obsessing over any company’s market capitalization is a fool’s errand. If you read the writings of a Warren Buffett or Jack Bogle, you won’t see that phrase. It means little to them. But apparently, pundits and financial journalists can’t talk about it enough.
No company is immune to the swings of an economy or the markets, both of which can affect stock valuations significantly. While $1 trillion sounds lofty today, there was once a time when $1 billion seemed equally so. (Think Dr. Evil saying, “ONE MILLION DOLLARS!!!”) The point is that by the time Apple does cross that line, it might be less of an issue than it is now.
As an investor, I am far more concerned with metrics such as cash flow growth, cash on hand and cash vs. long-term debt. Those tell me much more about the health of a company (even though they’re not as sexy) than what I consider to be a meaningless figure in market valuation. As it is, market valuation is what Wall Street’s sentiment is on a company, rather than its intrinsic value. When you have unprofitable flavor-of-the-month hot dot-com or social media start-ups with much higher market capitalization valuations than highly profitable and established industry leaders, it shows how meaningless this is in reality.
But then, the media cares only about clicks and eyeballs, not educating the public.
institutional investors will want AAPL in their portfolio. trillion is an imaginary barrier – aapl is still growing into the top handset maker by #’s – there are other big opportunities for growth in the apple tv and apple watch products, which will in turn spur a lot of home automation and other products. Apple is just getting started – by the end of 2015 we should see convergence finally realized.