Does AAPL go higher after the iPad arrives in the stores? Or does AAPL sell off after the hype dies down? After all, how much higher can AAPL go? Let's see what other products have done for AAPL and its share price.
The iPod launched in 2001. At the time, EPS was -6 cents. By 2005, EPS reached $1.56 in large part due to the iPod. Apple's share price went from $10 to $72.
The iPhone began in 2007. In 2006, EPS was $2.27. AAPL catapulted to $9.08 in 2009, its startling growth now clearly seen thanks to AAPL's retrospective accounting of iPhone sales. iPhone sales went from $13.7 billion in CY 2008 to $21.9 billion in CY 2009. iPhone sales constitute 46.9% of CY 2009 sales. Not bad for a product that was started in mid 2007. AAPL went from $130 to $200.
The iPad hits stores in April. The product is similar to the iPhone in several ways: it's going to be a high margin product estimated at 48 to 54% margins and the product launch is generating lots of early orders. It differs from the iPhone in that there will be no confusing accounting, something that held AAPL's share price back because many investors couldn't see the real iPhone earnings.
The problem valuing AAPL is there really isn't anything comparable. There isn't another company out there that has put together 3, soon to be 4, blockbuster products in so short a time. There are very few companies to compare them to in their market cap range. Plus, only EXM and MSFT have significantly higher market caps. It appears likely that when AAPL can reach EXM's earnings, it will reach EXM's market cap.
AAPL's CY 2009 earnings were $10.25. We will now have the iPad in addition to strong Mac and iPhone sales. If history is any guide, we should be looking at CY 2012 earnings over $20, or approximately $18 billion, about the amount that EXM made this calendar year. EXM's market cap is $314 billion. On a future earnings basis, AAPL should reach that cap before 2012. If it did so, its shares would be worth $346.
Disclosure: Long AAPL
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