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.
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.
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.
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.
Copyright © 2014 Microsoft. All rights reserved.
Tighter regulations and the end of a lengthy bull market in bonds have changed the landscape forever.
VIDEO ON MSN MONEY
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.