Apple: Why stop at $1 trillion?

“Apple, the leader in the race to a $1 trillion market value, is in no particular hurry to win,” Jack Hough writes for Barron’s. “It is spending feverishly to buy back shares, using its own cash hoard and money freed up by tax cuts. Last quarter alone, it bought $23.5 billion worth of stock, a record. A company that is planning a buyback spree probably doesn’t mind if it is able to buy cheaply for a while. Warren Buffett, whose Berkshire Hathaway owns 5% of Apple, said as much when discussing buybacks during a recent CNBC interview: ‘There is no reason at all for me to encourage other people to buy Apple.'”

“Yet Apple has an excellent chance of reaching $1 trillion by the end of summer—and higher over the following year. The math doesn’t seem especially controversial. It hinges on the assumption that the stock deserves an ordinary valuation,” Hough writes. “Apple shares are already creeping toward ordinary… Shortly before Christmas, when Barron’swrote favorably about Apple in a cover story, the stock was 18% cheaper than the S&P 500 relative to forward earnings. Now it’s 9% cheaper. Assuming no change in the market’s valuation, a move to parity for Apple by the time its fiscal year ends in September could send the stock 16% higher, to about $215, or 16.3 times next fiscal year’s earnings consensus of $13.20 a share. If the share count continues falling at its recent pace, that would leave the company valued at just over $1 trillion.”

“Among 16 analysts who have already ventured estimates for Apple’s earnings the year after next—that is, in the year through September 2020—the average suggests 11% growth,” Hough writes. “If that’s a preview of what growth will look like once tax cuts are no longer providing a boost, and when iPhones are even more widely owned than today, it’s a promising one. It suggests Apple can continue delivering low double-digit returns, including dividends, after hitting $1 trillion.”

Read more in the full article here.

MacDailyNews Take: To infinity and beyond! – Buzz Lightyear

Trillion, schmillion. Over time, Apple will go much higher than that. The company is currently horribly undervalued. – MacDailyNews, March 1, 2018

The next ten years are going to be absolutely amazing for Apple. The company has just started to really get going! — MacDailyNews, August 2, 2017

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