Bloomberg News

‘Apple Fever’ Prompts Predictions of $1 Trillion Value

April 03, 2012

An iPhone. Photograph: Alpha/Landov

An iPhone. Photograph: Alpha/Landov

Apple Inc. (AAPL:US) rose to a record after two analysts said the stock could surge past $1,000 a share, putting the maker of the iPhone on a path toward becoming the first $1 trillion U.S. company.

Apple, already the world’s most valuable company, climbed 1.7 percent to $629.32 in New York after analysts from Piper Jaffray Cos. and Topeka Capital Markets said demand for the iPhone and iPad, growth in China and the potential debut of a new television product would propel shares.

“Apple fever is spreading like a wildfire around the world,” Brian White, the Topeka analyst, said in a report that initiated coverage of the company with a buy recommendation.

White’s new 12-month target of $1,001 is the highest among the 45 analysts (AAPL:US) tracked by Bloomberg and represents a 59 percent increase over today’s closing price. He said Apple’s market value will eventually top $1 trillion.

Gene Munster, the Piper Jaffray analyst, said a prolonged stock surge will be boosted by the introduction of a new iPhone.

“Shares can reach $1,000 based on our belief that Apple will continue to win in global mobile devices,” Munster wrote in a note, predicting that the stock can reach $1,000 in 2014. At $1,000 a share, Apple’s market capitalization would be $932.4 billion.

JPMorgan Target Raised

Munster raised his 12-month price target to $910 from $718. JPMorgan Chase & Co. also raised its price target for Apple --to $715 a share, from $625.

Apple will debut a TV within a year, White predicted. The company also plans to release an upgraded iPhone that works with speedier wireless networks, he said. China Mobile Ltd. (941), the Asian country’s largest wireless network, will start carrying the iPhone in that same period, he said.

The television would create a new $100 billion market opportunity for the company, White said. China, meanwhile, offers some of the best growth prospects. Mobile-phone subscribers in the country with access to 3G wireless networks could reach 230 million by the end of this year, adding millions of new potential iPhone buyers, White said.

Some of the boost in Apple stock is a result of the relatively seamless management transition since the death of co- founder Steve Jobs, White said. The stock has risen more than 60 percent since he died in October. Tim Cook had assumed the role of chief executive officer from Jobs the previous August.

$1 Trillion in Sales

“Steve Jobs’s health was such a fear that was hanging over the stock,” White said in an interview. “Now you’ve seen that Tim Cook is doing a good job.”

Steve Dowling, a spokesman for Cupertino, California-based Apple, declined to comment.

Apple’s management should aim to become the first company to generate $1 trillion in revenue, a goal that’s achievable in the next decade, White said. Apple had sales of $108.2 billion in its last fiscal year, which ended in September.

A risk for Apple is the uncertainty over who will make critical decisions about future products, White said. Cook’s experience is with Apple’s supply chain and operations, and less with product development, the area where Jobs excelled.

The stock has risen 55 percent this year, spurred by soaring iPhone revenue and the debut of a higher-resolution iPad last month. Apple’s market value is $586.8 billion, far above the previous leader, Exxon Mobil Corp. (XOM:US), which is valued at $404.5 billion.

Dividend, Buyback

Apple investors also are benefiting from a $2.65-a-share dividend, starting in July, and a $10 billion stock buyback plan. The company announced both initiatives last month.

White previously covered Apple for Ticonderoga Securities LLC, where his last price target was $666. The next closest prediction to the new projection is Munster’s, at $910.

White said Apple can hit his target because its iPhone and Mac computers still have relatively low market share, giving them room to grow. He also foresees Apple introducing iPads with a smaller screen size, letting them compete more directly with tablet computers from Amazon.com Inc. (AMZN:US) and other rivals.

PetroChina Co. was the world’s first company to be valued at $1 trillion, achieved on its first day of trading in Shanghai in November 2007. The company’s current market value is about $280 billion.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • AAPL
    (Apple Inc)
    • $101.79 USD
    • 0.21
    • 0.21%
  • XOM
    (Exxon Mobil Corp)
    • $96.61 USD
    • -0.47
    • -0.49%
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