Apple has a clear path to a $3 trillion market cap, says Gene Munster

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Loup Ventures' Gene Munster believes that digital acceleration, the iPhone 12, and other factors could drive Apple stock to a $200 price per share and a $3 trillion market capitalization.

In a research note seen by AppleInsider, Loup Ventures analyst Gene Munster points out that the venture capital firm made similar predictions in 2019 and 2020. In the latter year, Apple grew 83%, outpacing the other so-called FAANG stocks.

For the 2021 calendar year, Munster is again forecasting that Apple will outperform heavy hitters like Amazon, Google, Facebook, and Netflix. More than that, "over the next couple years," the analyst believes Apple has a clear path to a $200 share price. That would put its market valuation to a number eclipsing $3 trillion.

That prediction is based on several factors, including an accelerating digital transformation due to the ongoing coronavirus pandemic. Although the rate of adoption may ease, Munster sees much of the change as sustainable in a post-pandemic world.

"For example, we estimate the percentage of US knowledge workers working remotely will settle long term at a level 3x greater than before the pandemic," Munster writes.

Apple, the analyst contends, is the cornerstone of this shift to a digital environment because of its blend of hardware, software, and services "that its competitors cannot match in terms of reach or popularity."

Munster points to the 20% to 40% growth in both the Mac and iPad business in the June and September quarters of 2020 after years of flattish growth. "In short, our reliance on the company will continue to grow in the years to come," the analyst adds.

Loup Ventures also expects the iPhone 12 and iPhone 12 Pro cycle to become Apple's strongest since the iPhone 6. Munster believes the catalyst for this growth cycle to be 5G. Although 5G will be a boon to technologies beyond smartphones, the handset market will be among the first to see a consumer spending bump.

"While we expect limited 5G network coverage in the US will initially temper consumer demand for iPhone 5G in the front half of 2021, as 5G coverage and performance improves in the back half of the year, we believe it will spur a multiyear iPhone upgrade cycle versus the typical one-year cycle," Munster says.

Stating in 2022, Munster forecasts that Apple is positioned to have two to three years of 5% to 10% annual iPhone revenue growth.

Additionally, the analyst believes Apple's stock price will be rewarded by anticipation and rumors of new business segments.

That includes expanded hardware subscription offerings, which Loup Ventures thinks could culminate in a "360 bundle" that would offer a mix of hardware, services, and software at a single monthly price.

"Today, about 55% of the company's revenue can be purchased as a subscription. By adding Mac, iPad, and Watch subscriptions, that number would approach 85%," the analyst says.

Rumors of an "Apple Car" or Apple automotive technology could also be a boon to the company's share price. Munster believes the Cupertino tech giant is well-positioned to contribute to the auto industry because of its differentiated technology in silicon, software, batteries, AI, and cameras.

The addressable market of the transportation industry is also massive. "Assuming over 80m cars are sold annually at an ASP of $25,000, global auto is a $2T market. For perspective, Apple's expected revenue for the current fiscal year is $315B," Munster points out.

Although an "Apple Car" isn't likely to debut before 2024, investor optimism regarding Apple's entry into the auto market could increase in 2021.

Munster writes that Wall Street's 2021 AAPL revenue growth estimates of 15% are in-line with Loup Ventures expectations, but he adds that consensus estimates for 2022 revenue growth of 5% year-over-year are too low. He believes 2022 revenue growth will be closer to 10%.

The analyst is predicting that shares of AAPL will reach a $200 price per share over "the next couple years," representing a 50% upside from current levels. The price target is based on a 35x multiple on Loup Ventures' 2022 earnings-per-share estimate of $5.70.

 

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