A number of investors believe Apple (AAPL) is deeply undervalued due to its earnings growth, extremely strong balance sheet, which is loaded with billions in cash, and a product pipeline that could keep the momentum going for the foreseeable future. Investor James Altucher has stated he believes Apple will be the first company to be valued at $1 trillion dollars. Business Insider reports, "Altucher thinks Apple will eventually be worth more than $1 trillion, maybe even $2-$3 trillion. Apple is currently worth about $320 billion, so $1 trillion would be a price of about $1,000 per share." Altucher was on CNBC's Fast Money this week, and he reiterated this viewpoint.
When you consider that Apple has price-to-earnings ratio around 12 and a growth rate that remains very strong, the shares do look undervalued. Based on the current stock price of $377.37 per share, the current market capitalization for Apple is about $350 billion. It seems that the market capitalization at that level could be causing concern for some investors, because this it already makes Apple one of the most valuable companies in the world. Depending on the stock price, Apple has been trading places with Exxon Mobil (XOM) as the world's most valuable company. Exxon's market capitalization is currently about $359 billion, and it has about 4 times the annual revenue Apple has posted recently.
Apple clearly has upside potential, but it might be awhile before Apple could nearly triple its market capitalization, especially since a $1 trillion market capitalization would make it worth about as much as three oil companies like Exxon. I believe that Apple shares could move to record highs if a stock split were announced. This would allow smaller investors to participate more fully, and it would make option contracts less expensive.
Here are some key points for AAPL:
Current share price: $377.37
The 52-week range is $285.26 to $422.86
Earnings estimates for 2011: $27.67 per share
Earnings estimates for 2012: $32.74 per share
Annual dividend: none
Market capitalization: about $350 billion
Exxon is a major integrated oil company based in Texas with operations worldwide, which include refining, exploration, and more. Exxon stock has been declining due to lower oil prices and stock market weakness over debt concerns in Europe. It now trades at a very cheap price-to-earnings ratio of about 8, and pays a solid dividend.
Here are some key points for XOM:
Current share price: $73.89
The 52-week range is $63.18 to $88.23
Earnings estimates for 2011: $8.60 per share
Earnings estimates for 2012: $8.78 per share
Annual dividend: about $1.88 per share which yields about 2.6%
Market capitalization: about $359 billion
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made for accuracy. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.