Two Wall Street analysts have begun talking seriously about the possibility that Apple will become the world's first trillion-dollar company, with a stock price that will touch $1,000.
On Monday, analyst Brian White of Topeka Capital Markets initiated coverage of Apple with an eye-popping prediction that Apple's share price will touch $1,000 within 12 months. Piper Jaffray's Gene Munster was only slightly less bullish, making the case that that milestone would be achieved by 2015 - if Apple released a television.
A $1,000 share price would push Apple's market cap (the number of shares outstanding multiplied by the stock price) to about $1 trillion. Apple would become the world's first trillion-dollar company, the analysts noted.
The news helped push Apple's share price to a new high of $632.20 in Tuesday trading. Apple's stock has nearly doubled from $341 a year ago.
"Apple fever is spreading like a wildfire around the world," White said in a report, according to Bloomberg. A Topeka spokesman said that he couldn't provide a copy of White's report to PCMag without White's permission, and that White was traveling outside the country.
Both Munster and White predicated their argument on the success of the iPhone, whose success continues to reach new heights. According to Gartner, Apple overtook Samsung as the world's top smartphone maker last quarter. Apple sold 35.5 million iPhones in the fourth quarter, a 23.8 percent increase from a year ago, while Samsung sold 34 million, Gartner said.
In a report, Munster said he believed that Apple would sell 33 million iPhones during the March quarter, a 10.9 percent dip off of the 37.04 million iPhones Apple sold during the peak of the holiday season.
But those results excluded mainland China, which White said justified his prediction. White also reportedly said that he believes Apple will expand into the television market, which Munster did not necessarily predict would occur.
Without a TV, Apple's stock price should top $960, based on an annual EPS of $80.18, multiplied by a multiple of 12 during calendar year 2015, Munster wrote. Add in a TV, however, and the added profits should push Apple's stock price above $1,000.
"While some investors believe the biggest issue for AAPL to get to $1,000 is the market cap along with excessive investor exuberance, which we address in this note, we believe the real story is earnings growth," Munster wrote. "Fundamentally, we believe shares can reach $1,000 based on our belief Apple will continue to win in global mobile devices."
According to Piper Jaffray research, 94 percent of all iPhone users will upgrade to another iPhone. For each quarter, between 33 to 45 percent of existing iPhone users are "in the bag," or planning to upgrade to the latest model, Munster wrote.
Apple also agreed to give $45 billion back to shareholders via a dividend and stock buyback program. That will help to add value to investment funds, which will likely shift at least some portion of their investments to Apple. The additional $400 billion in market cap will come from a combination of tech investments and a continued shift from major Apple investors, Munster wrote.
The risks? A lack of innovation, which both White and Munster cited.
"The key risk to the Apple story is pace of innovation," Munster wrote in his report. "While we have not seen anything to make us believe innovation will slow, it is the fundamental barrier that stands between shares at $600 and at $1,000. Apple has won the ecosystem and interface war, and must continue to innovate around its leadership position to grow the business. Going forward, consumer interest in owning future Apple products is a key metric to measuring Apple's pace of innovation."
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