UBS’s Milunovich: ‘Apple is creating a tech empire that likely has not reached its zenith’; ‘Buy’ rating, $740 target

“Former Merill Lynch hardware analyst Steve Milunovich, who hung up his hat in 2005, has materialized at UBS, where he kicks off coverage today of Apple (AAPL) with a Buy rating and a $740 price target, writing that ‘Apple is creating a tech empire that likely has not reached its zenith,'” Tiernan Ray reports for Barron’s.

Ray reports, “He argues: ‘Given Apple’s revenue growth of 66% in 2011 and mid-thirties operating margin, it would not be surprising to us if the stock carried a P/E of 15-20x. Instead, Apple sells at 12.4x our C2012 estimate and 11x our C2013 forecast. Excluding $115 in cash per share, the P/Es contract by two points to about 10x and 9x. With a current ROIC of 36% and decent growth prospects given that Apple has only 9% of total handset units and dominates the nascent tablet market, this valuation appears quite conservative.'”

Ray reports, “There are even references right up front to figures from ancient history: ‘We would make an analogy between Apple and the empire of Alexander the Great, who has been emulated by generals throughout history. Alexander dominated the world stage for 13 years; his greatest achievements include founding some 20 cities and conquering the Persians. Apple has begun to dominate the tech scene with its world’s largest market cap, increasing geographical influence, and leadership in multiple product categories. Apple is creating a tech empire in the consumer world that is now influencing the enterprise environment as well.'”

Much more in the full article here.

MacDailyNews Take: Apple the Great!


  1. There’s the understatement of the century. 20 years from now people will gape and wonder why some people had so little confidence in Apple in 2012 to become an even bigger powerhouse in the future as Microsoft proves it’s only shooting blanks and fades into the small software company it began as.

    1. Alexander’s greatest achievement was wiping the smile off the face of Darius. How sweet that was, to those subjugated by Persia. Compared to that, conquering the world was almost an afterthought.

  2. Doesn’t this analogy of Alexander the Great have to do with Steve Jobs? After Alexander the Great died, his empire fell into ruins. Won’t the same thing happen to Apple with the loss of Steve Jobs? Wall Street is already marking the death of Steve Jobs as the beginning of the end for Apple and Steve Jobs’ empire. Wall Street firmly believes that no more innovation can come from Apple without Steve Jobs’ leadership and that’s why the Apple empire is already claimed to be in a state of collapse. I think that Apple’s rapidly shrinking P/E already confirms that much.

  3. There is a great deal of upside to Apple Inc., but I wouldn’t have chosen the historical example of Alexander. I think it is closer to perhaps Genghis Khan and the Mongols. We’ll have to see how they do in the conquest of China.

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