How Apple stock could reach $1,000

Could shares jump from $350 to a grand? Yes, but the company's profit and revenue would have to explode.

By Kim Peterson Jan 13, 2011 2:04PM
Credit: (© Paul Sakuma/AP)
Caption: Apple CEO Steve Jobs
Image File Name: SteveJobs_042910_AP_120
Link to Image: \\co1xtmafs01\MediaDrop\Images\Channels\Money\2010\04April\SteveJobs_042910_AP_120.jpgNot long ago, the idea of Apple (AAPL) shares topping $300 seemed unthinkable. Yet here we are, watching the stock approach $350 on a clear march to $400.

Now The Wall Street Journal is discussing the possibility of Apple soaring to $1,000 a share. Impossible? Perhaps. What would it take for that to happen?

Brett Arends admits that Apple has made him "look like a total idiot." He dared to question whether Apple's stock could keep up its amazing momentum. And since then, the growth rate of the stock has ratcheted up to an annualized 67%.  

Now Arends and other critics are at least opening up to the possibility of a $1,000 stock price. Apple impresses the market every quarter with jaw-dropping earnings, and its net income has been on a tear. The iPhone has expanded to Verizon Communications (VZ), a new iPad is expected within months, and the MacBook and desktop business is dependably solid.

Post continues after video:
If Apple stock keeps it up, Arends calculates, it will hit $500 in October and $1,000 by February 2013. He says $500 call options, good until January 2013, are $20 a share at this point. For Apple to hit $1,000, its market value would have to reach around $900 billion (assuming there aren't big changes to the outstanding share total of 920 million), Arends writes.

Apple trades at about 17 times expected earnings. If that remains the same, Apple would need to hit $53 billion in annual profit to reach a market value of $900 billion.

So there's the magic number: $53 billion. Last year Apple's profit was only $14 billion.

On the revenue side, Arends calculates that Apple would need about $240 billion in revenue to get a profit of $53 billion. That would mean significant sales increases just about everywhere: Europe, Japan, China, India, Brazil and of course the United States.

Is this even possible? "You make the call," Arends writes.

This whole conversation seems fairly ridiculous. Arends assumes too many things will stay constant in his calculations (including P/E, share float and internal costs), and of course they won't. His back-of-the-envelope numbers are too simple for a complex international sales operation involving emerging markets.

But he's now put it out there: Apple at $1,000.
5Comments
Jan 13, 2011 10:56PM
avatar
To the person who hacked my screen name--revel 22--you've been busted.   Let's see you try to hack into the new profile---you slimeball.
Jan 13, 2011 5:30PM
avatar
If the stock gets over $500 it has nothing to do with the true value of the company but the hype and marketing of their products. Just wait to see what happens as new smart phones hit the market....at some point someone will build a better product. Apple and their proprietary software is a niche market.
Jan 14, 2011 11:59AM
avatar

Warning***I'm an Apple stockholder and the following contains common sense.

 

The talk of $1000 per share is a typical Phone It In article.  Child please.

 

The stock would have to go up 300% to reach that silly level.  Apple would have to rollout life changing products that would take over the world!

Not gonna happen any time soon.  Bill Gates will stop it.

 

Still, I'd like a Way-back machine, so I can go back to 2003 and buy Apple for about $8.

Jan 13, 2011 7:49PM
avatar

This company is soo overvalued its not even funny.  They have less than 10% of the computer market and they are losing ground to the other smart phone makers because of competition.  The only thing they really have no competition for is their Ipods and those sales have been falling yearly.  The Ipad has major competition coming out and wont overtake laptop or desktop sales because of its limited uses.

 

How can a company with cash of  around $25 Billion have a stock price over $300 and be valued over $300 Billion is beyond me.  What is the value of the stock ON THE BOOKS?  $52.17.  That is how overpriced this company is.  And further proof why investors on Wall Street should be forced to take basic accounting classes before being allowed to buy and sell stocks.

Jan 13, 2011 6:52PM
avatar
Sunny Outlook is correct.  Once the standards are established, as they now are, everyone can define and improve on the design and it'll become a manufacturing war.   There's nothing proprietary or investment bound (require large $$$) that will preclude everyone from coming out with an xPhone with Android, Meego or WP7 as the OS.  iOS is the only IP Apple has and it's not that unique.  The telcoms are eating 400/24=16.67/mo for iPhone so a $150 xPhone should make your connect $20/mo cheaper forever w/o iPhone 4,5,6 etc.  $1000/s is not going to happen, how about $280 share with Intel also at $28/s and MSFT at $34/s - ha, ha 
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
274
274 rated 2
447
447 rated 3
698
698 rated 4
633
633 rated 5
652
652 rated 6
650
650 rated 7
491
491 rated 8
268
268 rated 9
125
125 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.