How Much Bigger Can Apple Get? (AAPL)

How Much Bigger Can Apple Get?

The following video is part of our "Motley Fool Conversations" series, in which senior technology analyst Eric Bleeker and Chief Technology Officer Jeremy Phillips discuss topics across the investing world.

In today's edition, Eric and Jeremy look at the common belief that Apple has become "too big to grow." As Eric points out, the question of whether Apple can sustain heady triple-digit growth rates has become irrelevant, as it now trades for less than 13 times earnings and no longer needs huge growth to justify its earnings multiple.

As Eric looks at Apple's future, growth rates in the United States will have to drastically slow down by necessity; Apple was 80% of AT&T's smartphones sales last quarter, and smartphones are reaching saturation in the United States, though more growth could be available on Verizon and Sprint. Then there's Apple TV. While Eric's very bullish on its prospects to succeed if launched, the bottom line is that the iPhone drives 53% of Apple sales and a greater percent of profits. Given how often consumers replace phones and the iPhone's high selling prices, the television opportunity is just much smaller even if Apple succeeds. So as Apple investors look forward to strong year-over-year growth this quarter and beyond, focusing on Apple's iPhone growth in emerging markets with huge populations becomes critical.

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The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Eric Bleeker and Jeremy Phillips have no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Report this Comment On February 02, 2012, at 9:24 PM, MHedgeFundTrader wrote:

Apple has become a monster cash flow generator. Apple now has the envious problem in that sales of several of its products are going hyperbolic at the same time.
Apple announced net profits of $13.06 billion, or $13.87 per share, up 11% from the previous year. If the company just maintains that rate for the rest of the year, it will generate $55.48 in earnings, which at the current 11.5 multiple should take the stock up to $638, up 40%. If Apple makes it up to a market multiple, the stock should rise to $721, a gain from here of 58%.
If the multiple expands to its pre-crash average of 35 X, that would take the stock to a positively nose bleeding $1,941, giving you a 424% return from current levels. Then the company would be worth $2.8 trillion and rank 5th in the world in GDP, more than France, and just behind Germany. Wow!
It all reinforces my view that Apple shares will reach my long term target of $1,000 sooner than anyone thinks. Long term readers are well aware that I have been making this call for the past two years back when it was trading at a lowly $240. More recent subscribers will also recall that I predicted that Apple would be the top performing technology stock in my 2012 Annual Asset Class Review.
I'm not saying that you should rush out and load up on stock today. But it might be worth taking a stake on the next wave of fear that strikes the market.
The Mad Hedge Fund Trader
Report this Comment On February 03, 2012, at 4:11 PM, luxetlibertas wrote:

Apple is on a trajectory to being a $1000 stock, but with its iPhone it already captures 75% of the total profit made on mobile telephones in general. This gives me pause for thought.
Either, worldwide, people are going to spend a lot more on their mobile phones, or profits for Apple on its most successful product will start to top. Especially as margins at Apple at at a record high now and are expected to come down a little.
The iPad still has lots of room to grow though, partly at the expense of notebook computers and dedicated gaming devices, so that can be a source of optimism.
The Mac stays important, but does not impact the bottom line as much.
And even a successful introduction of an iOS based TV, if it happens this year, will address what is in comparison a fairly small market by revenue. Although it might integrate so well with other iOS devices that people will buy many more of these too.
But, for long term growth, I think it comes down to Apple's 'disruption machine', the capability to transform whole markets. It might well be that that particular capability originated from Steve Jobs exclusively.
Still, they will not run out of ideas any time soon, so I think that Apple will reach $1000 in a few years. That's why I own the stock.
Report this Comment On February 04, 2012, at 11:19 AM, TMFBreakerRob wrote:

Please, please, please...... don't do video articles. The information density in videos is too low for me to waste my time.
Please write it down or don't bother.
Report this Comment On February 04, 2012, at 5:53 PM, Michael7293 wrote:

No more video articles

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How Much Bigger Can Apple Get?

Comments from our Foolish Readers

Report this Comment On February 02, 2012, at 9:24 PM, MHedgeFundTrader wrote:

Report this Comment On February 03, 2012, at 4:11 PM, luxetlibertas wrote:

Report this Comment On February 04, 2012, at 11:19 AM, TMFBreakerRob wrote:

Report this Comment On February 04, 2012, at 5:53 PM, Michael7293 wrote:

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