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Barclays analyst Ben Reitz has a big bullish report on Apple this morning.And while he doesn’t come out and say it directly, he basically suggests Apple could easily get to $1,000 a share in the next four years.
Officially, he raised his price target to $710 from $630.
How do we get from $710 to $1,000?
Because Reitz says Apple can generate $300 billion in annual revenue, and $75 in annual EPS, by the end of 2015. And that’s without factoring in an Apple television set, which could kick in a few extra billion in revenue and “well over” $5 in EPS.
As Henry Blodget explained last week, if Apple reaches $250 billion in revenue, and maintains its profit margin, it would likely be a $1,000 stock.
While it might sound outrageous to say Apple will do $300 billion in revenue, it might be conservative. Apple CEO Tim Cook has already subtly guided analysts to believe Apple could do that, says Reitz:
A five-year EPS of at Least $75 – Could Be Better: In fact, this maths is pretty easy if you have been listening to CEO Tim Cook lately. We believe Cook has already outlined a similar range if his recent comments are taken literally. First, Cook recently stated he believes the iPad market could be as big as the PC market. The PC market currently stands at about 350 million units and $253 billion in revenue. Applying a conservative tablet market share for Apple of about 50% equates to 175 million iPad units sold on an annualized basis in a peak year or about $87.5 billion in revenue based on an ASP of $500. Cook has also stated that the smartphone market could top 1 billion units by 2015 – and applying Apple’s market share of about 25%, which equates to about 300 million iPhone units sold on an annualized basis in a peak year or about $150 billion in revenue. Cook also doesn’t believe the PC market goes away – and that the Mac has a bright future within it. We believe the Mac can grow at a 15%+ CAGR over the next several years with units approximating 35 million in CY15 for about $35 billion in revenue. When factoring in other segments, we believe revenue can approximate $300 billion within 5 years. A net margin of close to 25% (well below the recent quarter of 28.2%), yields an EPS in the $75 range. We note that this assumption does not factor in any potential benefit to EPS from share repurchases, which are increasingly likely (along with a dividend) as Apple accumulates cash.
And here’s the table laying all of that out:
In the near term, Reitz raised his estimates across the board for the March quarter:
…we now estimate fiscal 2Q EPS of $9.48 (was $8.95), now based on 43% y/y revenue growth to $35.26 billion (was $33.7 billion) and gross margin of 42.7% (was 42.3%). Our F2Q estimates now includes 33 million iPhone shipments (was 30.4 million) and our gross margin estimates are driven higher by iPhone mix, as well as positive NAND trends…
For FY12, we now estimate EPS of $43.98 (was $42.52) based on 48% y/y revenue growth to $160.2 billion (was $155.9 billion) with gross margin of 43% (was 42.7%) and including 138.26 million iPhone units (was 131.1 million). For FY13 we now estimate EPS of $50.00 (was $48.46) based on 18% y/y revenue growth to $188.8 billion (was $183.1 billion) which includes 175.3 million iPhones (was 165.4 million). For FY14, we now estimate EPS of $56.70 (was $54.65) based on 16.7% y/y revenue growth to $220.4 billion (was $213.6 billion) which includes 219.4 million iPhones (was 207 million).