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Apple? $1,000? Really?

Welcome to the land of the four-digit price targets, Apple (Nasdaq: AAPL  ) fans.

Yesterday, it was Topeka Capital Markets analyst Brian White, picking up coverage of the tech giant at his new firm with a $1,001 price target.

This morning, it's the more visible Gene Munster from Piper Jaffray upping his Apple goals.

Munster -- who has been astute in his Apple bullishness and was talking up Apple's plans to enter the actual HDTV market with an Apple smart television back when it seemed like a crazy notion -- is raising his 12-month target from $718 to $910.

Is $910 by early next year an outrageously high projection? It may be, but it's actually based on Munster's forecast for Apple to earn $65.04 in the 2014 calendar year (in other words, the final three quarters of fiscal 2014, and the first quarter of fiscal 2015 covering the 2014 holiday season). At a price of $910, Apple would be fetching a reasonable 14 times the following calendar year's bottom-line results.

However, not to be outdone by White's call, Munster believes that Apple's stock will hit quadruple digits at some point in 2014. Depending on the aggressiveness of Apple's planned share repurchases for fiscal 2013, Apple would command a cool $1 trillion market cap shortly after crossing $1,000.

No company has ever hit a market cap in the 13 digits. No company has even come close.

Apple's already closing in on the all-time record. Microsoft (Nasdaq: MSFT  ) peaked at $619 billion just before the dot-com bubble burst. Apple had 941.6 million fully diluted shares outstanding as of the end of December, so all it needs to do is get up to a share price of $658 to take out the old record.

Will Apple get there or simply repeat Mr. Softy's mistake?

The Apple difference
I recently argued that it's different this time, ruffling the feathers of those who believe that history always repeats.

For starters, Microsoft -- like many of its bubbly peers -- was ridiculously overvalued at the time. As high as Apple has run, it's really only trading at a forward earnings multiple in the low- to mid-teens. Microsoft didn't peak as a result of any mistakes on its own. It's actually a larger and more profitable company today than it was back then. The stock simply peaked prematurely because of investor mistakes.

Apple isn't just making money off old things. It has created entirely new categories. When someone wants a tablet, that person really wants an iPad. What Apple has never managed to accomplish in terms of market share in personal computing it has achieved with the "good enough" iPad that is replacing laptops around the home, textbooks in the classrooms, and clunky interfaces at consumer-facing retail establishments.

How about the iPhone? Regardless of the carrier-subsidized price that you're paying, Apple is making more than $600 on every handset sold. There's no way that you can compare Apple to Finland's Nokia (NYSE: NOK  ) when it was the handset maker to watch. Nokia was making far less off its old-school feature phones, and that was also a lot earlier in the planet's wireless migration.

Google's (Nasdaq: GOOG  ) Android may be gaining traction globally for smartphones, but the open-source approach that's making Android's success profitable is also why Google itself isn't the one cashing in. Android is more of a tactical victory for Google now, and one that it hopes to exploit as an app store middleman and as the country's top dog in mobile display advertising. It's a promising market, but it will never match what Apple is making on actual iPhones.

Either way, the world is changing. Of course things are different this time. Smartphones and tablets -- two categories that didn't exist for Apple five years ago -- now account for 63% of its sales.

Revolutions happen, and value propositions change.

See you at $658, Apple. The other milestones will follow in time.

Apple jacks
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The Motley Fool owns shares of Apple, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Nokia, Microsoft, Google, and Apple. Motley Fool newsletter services have recommended creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that
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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (9) | Recommend This Article (17)

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  • Report this Comment On April 03, 2012, at 2:45 PM, 1984macman wrote:

    According to an inflation counter I just checked, a dollar in 2000 was worth what a $1.32 is today. So for Apple to match Microsoft's record in real dollars, its stock price would have to climb to $818/share.

  • Report this Comment On April 03, 2012, at 2:50 PM, 1984macman wrote:

    I might add that if you calculated in gold, in 2000 gold was worth about $300/ounce. Today, it's going for upwards of five times that. So ifnone calculated the worth of Microsoft at its peak in gold, Apple would have to be worth (5x619=) $3,095/share....

  • Report this Comment On April 03, 2012, at 3:18 PM, techy46 wrote:

    Oh, tat would be hard for the shorts to resist? Projected $65 EPS with a 16 PE for $1040 PS? What would happen if they missed on EPS? Yikes, down $100-200 in one day.

  • Report this Comment On April 03, 2012, at 10:41 PM, jdwelch62 wrote:

    "Be fearful when others are greedy, and greedy when others are fearful." - Warren Buffet

    ...just sayin'...


  • Report this Comment On April 03, 2012, at 11:26 PM, pehenia wrote:

    Honestly, I don't know if others are greedy or fearful with Apple right now...


  • Report this Comment On April 04, 2012, at 2:46 AM, bookz wrote:

    Really? So is it more credible or a better headline to say that Apple is worth $999 a share or $1001 per share?

    Why are prognostigators even talking about that question? Did we really arrive at $1001/share on the basis of a bottoms up analysis? I'm impressed by the luck invoved in that. Not willing to press luck further by buying on the basis of that prediction being accurate.

    Just saying.


  • Report this Comment On April 04, 2012, at 3:17 AM, bradeoneill wrote:

    Msft actually keeps more of the money it brings in than apple does, making software and offering business support is just cheaper than manufacturing tablets and computers. Maybe apple will come out with a gaming system to compete with the xbox? how about one that you could use your tablet for a controller. i mean it would work great for family type card games if everyone had a tablet. or any head to head strategy game where players moves needed to be kept secret.

    oh yea the money isnt in games. its in business. who is really going to come out ahead in the end? the guys selling stuff to business or the guys selling the really cool new toy?

  • Report this Comment On April 04, 2012, at 5:30 PM, spaceageliving wrote:

    @1984macman: this is a meaningless comparison because it assumes a share of apple is equal to a share of msft in equity, which can't be true since its highly unlikely the two companies have issued an equal number of shares.

    @bradeoneill: the stuff you are talking about already exists for iPad, check out scrabble app for a great example. xbox is crap and terrible for msft gross margins, bad business model.

  • Report this Comment On April 04, 2012, at 7:40 PM, bradeoneill wrote:

    spaceageliving- I know its on apple, but you are talking about overcoming years of a pc bias in business. they aren't going to switch to apple just because it works. They want something that they are familiar with and that works right now.

    Xbox won the battle with ps3, the first xbox lost money, the xbox 360 is profitable despite starting with a video format that lost out to blue ray, I think the xbox720 will bring together a lot of the strengths and be sold more as a home entertainment device than pure gaming center. the ability to stream videos, set up an excellent music system, social networking device, and will have superior processing power to most home pcs. I think they are setting it up to possibly replace the PC and work brilliantly with tablets and other home devices.

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