“One thing that I think confuses investors about Apple (AAPL) is that it’s difficult to envision a company, any company, that can possibly be worth $1 trillion, let alone $2 trillion,” Richard Bloch writes for Seeking Alpha. “Here’s what I consider to be a fairly conservative scenario of how Apple gets to $2 trillion.”
“I decided to assume that iPhone and iPad sales will grow, but at a gradually reduced rate over the next four years. And I assumed the introduction of the iNBT (Next Big Thing). That could take the form of some TV product, or something else we don’t even know about yet – and that iNBT sales will start growing at a rate similar to the iPhone and iPad when they were launched,” Bloch writes. “So here are my projected revenues.”
Bloch writes, “Apple’s shares outstanding have been rising over recent years. I expect that to continue, probably surpassing 1 billion shares by 2016. But even assuming a rising share count, here’s how I expect trailing 12-month earnings per share to grow based on my revenue and margin assumptions. Although it may look overly optimistic, I’m actually projecting slower growth.”
Bloch writes, “I’m going to make yet another assumption that’s probably way too conservative. That the market gives AAPL a trailing PE ratio of 12. Even at that PE, which I would consider somewhat low. The stock price gets to $2,000 per share by 2016 and the market cap tops $2 trillion.”
Much more in the full article here.
Don’t be stupid. There’s no way $2 trillion is justifiable. The only way this will happen is if Bernanke does unqualified quantitative easing driving the U.S. dollar down to the level of toilet paper.
u r. it is possible as eps this year will be in excess of $52. by 2016 eps will be $400 plt and even @15PE it’s way more then $2trillion. In all possibilities it will be over 2 trillion. Only stupid people cant see that
Actually it will happen if exactly four things occur before 2016:
1. Mac sales growth STOPS (or continues to rise).
2. iPad/iPhone sales growth SLOWS (or continues to rise).
3. Margins for the products stay about the same.
4. Apple introduces only ONE MORE product line that’s as successful as the iPhone/iPad.
That actually doesn’t seem very far-fetched to me.
I’m all for Apple going to 2 trillion dollars but to assume that the Apple Television will grow at the same rate as the iPhone and iPad is optimistic. I say this because the price will probably will be around $2000. That’s a lot higher price than the iPhone or iPad. To expect the have the same volume sales for a $2000 product compared to a $500 and $300 product is very bullish. Now if the profit margin for that $2000 product was significantly higher then…..
I read the source page and he was under guessing the projections. What I find most interesting is the mental block that many people have about this. Apple dominates only a few markets like the mp3 players with their iPods. The other markets they are 10% to 25% of the markets at best and in a recession is crushing the other companies in these markets, including the computer market. Yet, with double and triple digit growth each year, AAPL is going to hit a glass ceiling that no company can pass. Reminds me of jets can never pass the speed of sound. Or we will never be able to send a man to the moon and bring him back.
Think different! Apple doesn’t see a limit only the talking heads. It is just a number. Do you really think that Apple can no longer create new innovative products or create a new market? Really?
Ahem… we, the US that is, did send men to the Moon and back. It was called the Apollo program.
Next up will likely be China and India, but hopefully Elon Musk & SpaceX will squeeze in first. If not first to return to the Moon, then Mars beckons.
Predicting the future is a fool’s errand under any set of assumptions. However, the point of this article does raise something interesting. Before the iPhone was announced, Apple was trading at around $85 per share. I doubt anyone did or could project what impact the iPhone would have on the stock price of Apple in 2012, which as of today is approximately 7 times higher, largely driven by the growth of the iPhone and is big brother the iPad. But paradigm shifting products don’t come around very often, and certainly not of the scope caused by the iPhone. If Apple does hit another grand slam of the same class in the next couple of years, perhaps 1 or maybe 2 trillion in market cap is doable. I certainly hope so.
Well, Dyson has the Vacuum Cleaner, Hand Drier, cool/hot Fan markets tied up.
Other than that, the sky is the limit.
I think we’re all forgetting something here… Steve Jobs is no longer with us anymore, so it’s highly unlikely that the “next big thing” is going to come out of Apple (outside of any products that Steve Jobs was already working on before he left Apple).
Steve Jobs was not the inventor of all Apple products.
This is what Steve saw when he said, “oh wow”
We will never know, but nothing is impossible, just variations on probability.
“Apple can reach $2 trillion market value…”
because by the end of 2016, Apple will probably have $1 trillion in “cash.” 🙂
My only current fear with AAPL is the health of the overall stock market. A crash will take down even mighty AAPL, although Apple’s current cash hoard provides some protection.
Maybe we should wait until it hits one trillion before we start dreaming about 2.
Agreed. It is fun to think about. But let’s not get the cart before the horse.
I’d be happy with $700 a share first