“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…”
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.]