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Piper's Gene Munster details the reasons he sees Apple (AAPL -0.6%) reaching $1,000 over the...

Piper's Gene Munster details the reasons he sees Apple (AAPL -0.6%) reaching $1,000 over the next couple of years. Among them: a completely redesigned iPhone; an Apple TV set going for $1,500-$2,000; limited iPhone subsidy cuts (partly due to the low churn rates of iPhone users); continued margin strength; China demand; soaring tablet sales; and enterprise Mac/iOS adoption.
Comments (23)
  • Hitesh Patel
    , contributor
    Comments (314) | Send Message
    i-trillion+ market cap. Memories of CSCO, MSFT and AOL during the Tech bubble
    25 May 2012, 10:06 AM Reply Like
  • Wall Street Smart
    , contributor
    Comments (474) | Send Message
    AAPL can support a trillion dollars in Mcap because they would have $60 bn in profits. The companies you mentioned did not even have $60bn in sales during the bubble.
    25 May 2012, 10:19 AM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
    They were all overvalued during the tech bubble, and significantly so. A trillion market cap for AAPL in 2014 would be a 14 times P/E multiple. Which is just a tad lower then the PE of the market right now (a market which is arguably undervalued).


    Counter argument?
    25 May 2012, 10:12 AM Reply Like
  • Wall Street Smart
    , contributor
    Comments (474) | Send Message
    No counter argument because you are correct.
    25 May 2012, 10:19 AM Reply Like
  • berylrb
    , contributor
    Comments (2179) | Send Message
    no counter argument but counter "concern",


    Apple TV - $1,500 does not make sense given a 27" iMac with less tech specs selling for $1,700, Apple coming to market with a TV less than 27" would be a PR disaster, not one they can't recover from but certainly a 1-2 quarter downtrend as analysts await the sales figures


    Enterprise - certainly Apple's Enterprise endeavors are threatened by the alleged W8 potential. I may be heavily invested in all things iDevices, but the buzz around the Nokia Lumia with W8 is substantial enough to warrant concern.


    So of Gene's 7 upticks, two should be either removed or limited from any calculations of w/r to profit going forward.
    26 May 2012, 10:44 PM Reply Like
  • noidea2
    , contributor
    Comments (52) | Send Message
    Would be a gift if Gene could explain to us common mortals why Apple's share prices refuses to be valued at higher metrics and thus be around USD 700 in a bearish market. We already know why Apple is so fabulous. What we do not know is why so few investors value the stock.
    25 May 2012, 10:49 AM Reply Like
  • Capt'n Wisdom
    , contributor
    Comments (15) | Send Message
    Imagine if the next iPhone, or perhaps the one after, is truly a substitute for a physical wallet. Then add ICloud and iTunes (ready made charge accounts) to the ecosystem, and maybe some Siri intelligence, you have a formula for lifelong comittment to letting Apple be the center of your consumption habits. Oh yes, and use a home information hub like "iTV" as your go to device for reviewing past activity, purchasing new goods, and entertaining in between. Really, do you think Jean Luc Picard had a lether thing in his back pocket to identify himself on alien worlds and pay for dinner?
    25 May 2012, 10:51 AM Reply Like
  • evannever
    , contributor
    Comments (52) | Send Message
    Ah how I miss me some CPT Picard
    25 May 2012, 01:56 PM Reply Like
  • berylrb
    , contributor
    Comments (2179) | Send Message
    Right On! The Starbucks App is an example of the substitute for a wallet gig. I'm surprised more retailers have not created a iPhone swipe app.


    Nonetheless, Starbucks is a good example of the paradigm shift needed at point of sale. Starbucks rolled out the app "reader" to facilitate iPhone as a wallet, how many retailers have the capacity to do that? I can see Safeway (Genuardi's East Coast), but not sure if Apple would bear the weight of such a maneuver, or the retailer bringing to market their own swipers ... great picture of our brave new "Mobile" world.
    26 May 2012, 10:50 PM Reply Like
  • scott trader
    , contributor
    Comments (4530) | Send Message
    give aapl a pe relative to some others amzn crm fb cmg you then have avalid arguement
    25 May 2012, 11:28 AM Reply Like
  • dpkelleyii
    , contributor
    Comment (1) | Send Message
    As aapl's market cap increases, institutional buyers with concentration limits slowly lose the ability to buy more. So buyers to take it to 1000 decrease over time. How is this solved? I'm a believer so I'd love to hear serious comments.
    25 May 2012, 11:45 AM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
    Right now a lot of institutional buyers who are limited to equities with dividends currently are excluded from holding AAPL. That will change when the dividend is executed to shareholders, thereby allowing a larger pool of institutions to start adding AAPL.


    Not to mention that the Dividend Yield has actually increased since it was announced due to the inverse relationship between yield and price. Thereby making it more of a good valuation for those who seek dividends.
    25 May 2012, 11:50 AM Reply Like
  • Big Dawg
    , contributor
    Comments (12) | Send Message
    I agree with Piper's analysis and Capt Wisdom...having worked at Apple I have learned to never underestimate their crystal ball and UI...most follow on competitors are copy cats ...if half of what Piper states comes true....we will see $850.00 a share in 2013.
    25 May 2012, 11:47 AM Reply Like
  • jkinlan
    , contributor
    Comments (3) | Send Message
    There are dozens of reasons to have disbelief in AAPL at $1K like the following:


    1. Is Gene Munster really right on subsidies
    2. No Technology has reigned supreme for a long period of time
    3. Patent issues
    4. Complete Europe meltdown
    5. China slowdown
    6. Are families going to pay $1500 for a tv when they can get a 46" tv at Amazon for $500
    7. Confidence for the leader is always the highest when they are on the top -- competition will exist in the future.
    8. Stock market drop when multiples drop to single digits (remember 2008)


    Believe me I am quite long Apple -- but there is a collective group think about this $1K event happening
    25 May 2012, 11:53 AM Reply Like
  • $vix
    , contributor
    Comments (421) | Send Message
    I believe there are quite a lot of families that would certainly buy an apple tv if it differentiates itself from the others. There are many people who are interested in state-of-the art electronics. You can buy a surround sound system for a few hundred bucks, if that is what you are looking for. But others are looking for a better experience. Have you ever heard of Krell? Myself as well as many of my peers have just purchased a home theater system using Krell electronics with Magneplanar center channel and surround speakers and a Krell Subwoofer. The cost was just under $100,000. Much of this stuff has become the norm in many affluent households with plenty more buyers out there.
    The Pioneer Kuros plasma, which is no longer available, has one of the finest pictures in the industry. If aapl came out with one better, i would give the Pioneer plasma to the kids and buy the appl.
    I was at the offices of Blue Ridge Capital in NY the other day. Sitting on the desk in many of the offices were huge apple computer monitors. They could have bought NEC or Samsung monitors for a few hundred bucks but they spent thousands on aapl monitors. They weren't just wasting money either, compare the picture quality and you'll understand why they opted for the aapl.
    My point is that there are plenty of people who have the income who will consume the more expensive products if they offer a superior experience. Stevie Cohen owns nearly one billion dollars worth of art. Owns, among others, a 40 million dollar home in Greenwich and a 100 million dollar home in the city. There are plenty of others out there just like him. These guys have the purchasing power of most of the people in the US put together. On a bad year, Cohen makes 600 million a year. Thats 50 million dollars per month. Thus,It is very likely there will be lots of people who will buy a $2,000 apple tv.
    By the way, why would you want to purchase that tv from amazon. If amazon has it for $500, you could find it elsewhere for much less, , , all offer far better deals and service. A great site called lists vendors who offer the best prices. Amazon rarely offers the best prices and if you bought there, you have overpaid. Amazon has become a compilation of third party vendors who connive and bait & switch. I searched the internet yesterday for an item i needed. Newegg had it for the cheapest at $4.92 plus shipping of $3.22. Amazon had it for $7.95 plus shipping of $5.95. Why in god's name would anybody shop at amazon. Then I found a place that had it for sale at $1.95. I clicked on the vendor which took me back to the Amazon site. I went through their checkout process only to find that in tiny print at the bottom they said that the item was refurbished - on top of that, they wanted $15.95 for shipping. As people become smarter, and more quality vendors offering competitive pricing emerge, people will become tired of the amazon games. Bezos is a master manipulator and it is only a matter of time before he will have to have to start selling some of those space shuttles in his collection as investors come to the realization on the true amazon story.
    25 May 2012, 01:01 PM Reply Like
  • berylrb
    , contributor
    Comments (2179) | Send Message
    @$vix, Tech-for-Less has $600 new, but your point is well taken, and also consider that people would not be buying an Apple TV for the TV alone but for the promise of ...


    @jkinian, I agree with you re the collective group think, but there's two groups even there: those that agree on the fundamentals given new product cycles and the roller coaster earnings/stock price reality given the Christmas season uptake (Q4); and, those who are truly exuberant retail investors (we won't talk about the latter, Ha). For the former, who examine Year over Year data, there is no rational reason to not expect AAPL to edge up Q3 and blow away estimates Q4.


    Your #5 China slowdown seems not to be supported by the abundance of news and Cook's own trip to smooze. Somethings happening to move the iPhone to the 700M on the other telecom. Even if there's just a rumor or announcement of something happening in 2013, that will certainly cause a few million to postpone upgrades.


    Your #2, 6 & 7 are all contingent upon new products entering the field, with the amount of $ spent on R&D, and Apple's consistent history and predictability w/r to product cycles there should be some sort of refresh across the board by the holidays.


    Clearly there is competition with smartphone products individually, and maybe a tablet or two, I totally agree with you on that threat. However, there is no competition w/r to the Apple ecosystem, millions will buy the latest Apple product to add value to their ecosystem, that is a 3rd or 4th Apple device, and we haven't even talked China yet, if . The only nearest competitor is the Nokia/MS smartphone/tablet, also slated for the holidays. Here's the thing however, Apple is beat by like 1% in China and that on the competing telecom, Apple's share to start with was only a minuscule, 6%! Even if Apple ONLY doubled in China to 12%, there'd be the same profit increase as in Q1 2012, that's bankable.


    Lastly, I expect a bearish Q1 2013 price target, announced January 2014 to be $850 not $1,000. That's just based on a conservative trend line for 2009-current, yes? But even so, I'm not adding to my position at these prices, Ha, no way! Bottom line I have some disbelief too, but the fundamentals do suggest the stock moving, but not with this attention level towards $1K.
    26 May 2012, 11:18 PM Reply Like
  • $vix
    , contributor
    Comments (421) | Send Message
    I am a trader and my goal is to make $$$ either on the long or short side regardless of my fundamental feelings about a company. I don't think anyone could argue that with the release of the iPhone and iPad, apple has really set itself apart. I have used many phones, including the Samsung Galaxy ii and have already tried the iii in beta form and none of these products from a user experience and reliability/stability standpoint are on the level of the current iPhone. I am not in the camp that the iphone needs a larger screen as Samsung fans tout. I want a smartphone that is easy to use, customize, is reliable and just simply works when I need it to. I'd also like it to be well made and in a size that is easy to hold, carry and slip into my pocket. The iPhone 4s satisfies this criteria. I don't want a phone the size of Rhode Island. When i need a larger screen, i'll use a laptop, desktop or tablet. With respect to the tablet and while the media incessantly only talks about a few tablets, the reality is that there are lots of tablets available to the public. I have tried everything from the nook color to the Samsung galaxy 10" and none operate on the level of the new iPad. The resolution of the new iPad is so superior that it makes it difficult to use anything else. The reliability and the smoothness of the operation as well as the incredible user experience the iPad provides puts it on its own level. It is truly a great product that is so enjoyable to use that it becomes addictive. Currently, apple has absolutely no competition with these products. Their ecosystem is also pleasurable and offer some truly incredible applications. I have spoken to many iPhone and iPad users and all have said they would not switch to another device as they simply love their iStuff.
    All that said, lately it has not moved the stock price. There are many retail traders that are in quite a lot of hurt right now as they are still long aapl over 600 and at present, the stock has not responded to any upgrades or good news. Based on fundamentals and the tremendous growth potential for the new iPhone and the iPad, the stock should be well north of $700 by now. There are several powerful hedge guys the buy in collusion. They breakfast together, golf together, attend Ferrari outings together, enjoy drinks poolside in East Hampton together. They decide together to get into a stock in a big way and it runs from 300 to 644 in months. Conversely, they also get out of their position together and the stock runs from 644 to 522.18 in short order. This is the way the game is played and one can sit there and pontificate about nonsense or learn how the game is played and make a very nice living doing so. On 5/18 when aapl went from 543 to 522 intraday, money was actually coming into the stock as it went down. If you knew what to look for and took a position in it. Look what happened on the next trading day on 5/21. You could have made a 20-40 point profit. Recognizing this on my charts, I took a small position on that Fri of 500 shares at the close at 530.27. At the opening gap i added another 500 at 535 and another 500 shares at 544 into the continued days rise. I sold all 1500 shares at the close for 560.38. While I am no Stevie Cohen, that was a nice days pay. Now sometimes I even ignore my own discipline and the patterns I am recognizing because i let the fundamentals of aapl cloud my judgment over the technicals. In my trading account i still own 1,000 aapl at 594. The technicals were telling me to sell and take my profit but I was tired of trading that day and let the wonderful appl products lull me into complacency. Got my head handed to me. Until the hedge guys decide to run aapl back up, aapl will meander. Bottom line is one can make a case for the fundamentals etc etc, but the big players moving the stock in the short term enter and exit at certain levels based on technicals, recognize that, ignore all the other nonsensical noise and talking heads and you can play the trading game very successfully. If you are an investor, on the other hand, sadly, you must wait until some type of world tragedy to be able to pick up good stocks at bargain prices to make sizable returns. During 11/08-3/09 i built a portfolio of 1,000 shares of each of the following: axp @ $10/share, aapl @ 83, msft @15, joy @ 14 and lastly ibm @70. An investment of $192k has turned into a handsome return. While I would gladly trade in & out of ibm or aapl to make daily income and i believe aapl will trade to the 654 range, i would not invest at these levels regardless of how brilliant a company is. Not that they can't go higher, but for me , the downside risk from here would outweigh the investment potential. There is no money to be made getting to the party early, wait on the sidelines until some devastating news pummels the markets.
    25 May 2012, 12:04 PM Reply Like
  • evannever
    , contributor
    Comments (52) | Send Message
    even if you are correct to the letter, aren't the decisions of the East Hampton Ferrari club influenced by the fundamentals?


    Also, when are you going to start writing blogs on SA to let people like me know "what to look for"?
    25 May 2012, 02:12 PM Reply Like
  • Yokyok
    , contributor
    Comments (325) | Send Message
    the relevant question is what will you be able to buy it for when it's done going down.
    25 May 2012, 12:58 PM Reply Like
  • milehr
    , contributor
    Comments (475) | Send Message
    The author did not mention the company's likely moves into the Google and FB territory.
    25 May 2012, 01:14 PM Reply Like
  • berylrb
    , contributor
    Comments (2179) | Send Message
    what would the FB move look like?
    26 May 2012, 11:33 PM Reply Like
  • bailinnumberguy
    , contributor
    Comments (1090) | Send Message
    AAPL's eps will be $50 in 2012 and $60 in 2013. There are 120 million iCloud users. The company has almost no customer churn, is dominant in Smartphones, tablets and personal computers. Cash alone is worth about $125 per share. A company's strength is represented by the margins that it's able to achieve and Apple is in a class all by itself. None of the other companies that have reached $500B in cap. had anywhere near the brand loyalty that Apple enjoys and the market cap. for each of those was a decade or more ago, so where's the inflation effect? AAPL will almost certainly be a trillion dollar company within 2 years if they continue to execute.
    25 May 2012, 03:34 PM Reply Like
  • bjnflicks
    , contributor
    Comments (1976) | Send Message
    $1000 is very possible, even probable, but it would help if they would split the stock. $100 seems a lot cheaper than $1000 and the high price has a negative psychological effect which may explain why the stock has failed to do higher yet. But it will.


    Near term catalysts to push it above the $570 and $625 resistance levels are as follows:


    1) The fact they are almost the only tech company that is truly dominating, has steller growth globally (don't worry about Europe, they will still buy phones and computers even if the southern Euro governments are deep in debt), has wiped out whole groups of competitors (poor HP, RIMM, Sony, Nokia etc. etc)


    2) Best brand loyalty in the world


    3) Earnings are fantastic and cash hoard is humongus


    4) Low taxes and labor costs seem sustainable


    5) Excellent people at the helm even without Jobs


    6) Apple TV announcement sooner than later, maybe June 11


    7) Run up into new iPhone release bound to be colossal, as well as other new products and ability to beat back Amazon, so Samsung is the only real competitor and that on the lower end


    8) Switch by security-conscious enterprises from Blackberry to Apple


    9) Major positive influence in Hollywood amongst studios and networks, doesn't hurt Disney CEO is on their board. Hollywood will be Apple's whore and they can afford to pay for content.


    10) China huge growth bound to continue,


    Put it all together and what the hell is the stock doing going down today? technical traders seem to be in charge, for now, but anyone who shorts or sells Apple at these levels has to be out of their mind. I say $750 this year, $850 near and $950 the year after more or less.
    25 May 2012, 06:08 PM Reply Like
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