Editor’s note: This article was first published in August 2013; its sales figures, revenue split by product, forecasts for 2013 and 2014 and earnings per share are from that time. The 550, 600 and 700-dollar levels are pre-split prices (Apple split its shares 7-for-1 in 2014 and 4-for-1 in 2020). This price forecast dates from August 2013 (before Apple’s 2014 and 2020 stock splits) and is kept as a historical record. It is not investment advice.
Apple has been a stock that the big market players could push around very easily, although something ought to change in the eyes of the investors who analyse this company. Apple is no longer a company expected to deliver the growth it had accustomed us to, quarter after quarter. That pace of growth is impossible, so we would no longer be talking about investing in Apple as a growth company, but about investing in a solid, high-value company.
That changes the rules of the game. One thing I am sure of is that we are not going to see a 4,700% return over the next decade, which is what the stock returned over the last 10 years. But this company is still trading below its real value. Could it get back to 700 dollars a share?
Bear in mind that Apple’s annual sales have been 156 billion dollars, and 90% of its revenue comes from basically three sources: iPhones (50%), iPads (20%) and Macs (15%)… The rest of its revenue comes from other products such as iPods or Apple TV.
Practically all of its product sales are falling except for the iPad and the iPhone, which are growing: not at their earlier pace, but growing. From 2011 to 2012, at least, iPhone sales rose by about 72% and iPad sales by about 80%.
For the rest of its current products, we could expect sales to decline. Roughly speaking, Apple is expected to report annual sales of 169 billion for 2013 in September (when its fiscal year ends) and 180 billion for 2014.
Based on these numbers, Apple should earn around 42 dollars per share, which in principle would give us a target price of about 550 dollars, but…
We also have to factor in the launch of the iPhone 5s or the iPhone 6, which these forecasts do not include, as well as the deals it is securing in China. Nor are we counting the iWatch or rising Apple TV sales. Even being pessimistic about sales of these products, they could bring in earnings that would easily take Apple to 600 dollars a share.
And if we remember that Apple is still the most solid and solvent company in the world today, and that it now pays dividends, Apple will return to 700 dollars, probably sooner rather than later, as long as nothing unexpected happens (which in the stock market always can).
Featured image: Maurizio Pesce from Milan, Italia, CC BY 2.0, via Wikimedia Commons.
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