“Apple management’s decision to unleash the largest share repurchase program in the history of Wall Street is no small thing,” Jason Schwarz writes for TheStreet. “Any company that is able to grow earnings and simultaneously reduce its share count will find itself in a golden age of earnings per share appreciation.”
“When all is said and done, year over year EPS appreciation or depreciation is what moves a stock. EPS is Wall Street’s fall back metric. It never fails. Apple’s current rate of negative EPS growth (caused by year over year gross margin compression) is the leading cause behind the $300 correction of the last eight months,” Schwarz writes. “If we assume only an evolutionary upgrade to Apple’s product portfolio it provides us with the following assumptions to build a forecast model: 20% annual revenue growth, 36% gross margins, a steady stock rise of $25/quarter, and 29% of profits re-allocated back into a stock buyback over the next ten years. If these four assumptions hold constant, the EPS projections look something like this…”
2014: $57/share
2022: $501/share
Schwarz writes, “In 2022, Apple projects to earn $501/share. With a P/E of 10 that puts the stock at $5,000… It’s Apple that is positioned to profit from new product categories because of its pre-existing ecosystem. When Apple unveils a television app store with complimentary hardware the people will come. When Apple unveils an iWatch/iWallet people will come. When Apple unveils multiple models of the iPhone people will come. No other company is in a like position.”
Much more in the full article here.
[Thanks to MacDailyNews Readers “Rainy Day” and “Ellis D.” for the heads up.]
Someone who actually understands how to look ahead and value the fundamentals. This is not virtual it’s real.
It is TheStreet after all, so where’s the caveat?
I know at least a few of the AAPL owner-faithful here will understand this comment (coming from a very deep well of pain and disappointment over the past 8 months):
Yeah. Right. Bullshite. All of the above. Each and every word.
May and wizards of Wall Street and the future prove me wrong.
Hate and BS can only cripple a stock for so long. I and many others have been “patient”. It is time. Reality and the expectation that Apple will never create a NEW category so that others can copy it is already calculated into the stock price. There is only the up side from here now. iRoadKill all around and Apple continues to grow and take new markets.
In a month or two, what will they do when China Mobile opens the final 67% of the Chinese mobile market to Apple iPhones and they start buying the iPads leaving their old PC NetBooks at home.
And don’t forget server farms.
When Apple actually buyback shares, anyone knows?.
They plan to start buying back shares this month, and continue with the program until the end of 2015. Takes time to move $60 billion properly.
Not being familiar with how company buy-backs work, I’ve been curious about this for some time.
When Apple decides to buy back a large amount of stock (say a billion dollars worth) can they have someone watch the stock price and try to time it when it’s at a low point (or say time it to give the short-sellers the most pain) ?
Or do they have to purchase the stock in a more open manner where they telegraph to the rest of the market days ahead of time when and how much stock they are buying ?
Just curious.
They probably have some leeway on this, but they can’t intentionally try to move the price with massive stock purchases. My guess is they will set a plan to purchase a fixed amount each month or week till they meet their target.
“app store with complimentary hardware”
They need to get an editor.
Can’t Samsung just easily copy any product Apple makes? Apple is unable to protect it’s IP and usually just ends up throwing money away after the court tells them their lawsuit is “silly and time-wasting to the court system.”
I see all these big numbers about the future of Apple yet you’ve still got people saying Apple is worth $240. I don’t hear anyone claiming Google or Priceline are worth $240 a share. It’s always Apple that’s said to be in a bubble. Amazon’s share price is as strong now as it was last year and it was Apple’s so-called cash machine that collapsed like a mud hut. I’m just saying talk is cheap. I don’t see any change in Apple boosting the strength of its share price even to the point of merely keeping pace with the rest of the stock market.
“Can’t Samsung just easily copy any product Apple makes?”
Yes and no. They can copy simple things like a touch screen or a headphone jack. It is much harder to copy things like the iTunes store, the network of over 400 Apple stores or the integration of iPads, iPhones and OS X.
It’s all about the future. Future earnings. Future revenue. Future margins. Apple is doing well but what is coming down the road for Apple? It’s not about what you’ve done in the past but what you are going to do in the future. With hardware margins obviously declining in the future Apple needs to demonstrate its potential revenue streams. They just can’t depend on iPhones and iPads forever. When they show that they can monetize something besides hardware or at least a new hardware item, then Apple will go up. But not until then. Guessing what is coming is just guessing. Talk is cheap. Apple needs to lay something on the table.
Oh hail, yeah….
EPS is what moves normal stocks. But we are talking about AAPL here. EPS never failed as a metric until now.
Agreed.