Establishing a 12-month price target for AAPL is as much an art as it is a science. Over the past four fiscal years (from October 2005 to September 2009) Apple has averaged an annual rise in revenue of 32.9% and an average gain in eps of 56.5%. These would be astounding numbers for anyone who hasn't been following the company on a daily basis over this four-year period.
Apple (Ticker Symbol: AAPL) closed on Friday at $218.95, an all-time closing high. During Friday's session the shares traded as high as $219.70 on volume of more than 32 million shares. No doubt the nearly 4% rise in share price and above-average demand for shares was due in part to an announcement of the release date in the US of the Wi-Fi version of the Apple iPad. At the current market cap Apple is among a small number of enterprises trading on a US exchange with values near or above $200 billion. No matter the distance the share price has already travelled, further gains in value are ahead.
In Apple's first fiscal quarter of 2010 the company realized about a 32% gain in revenue and about a 47% gain in eps. Clearly the pace of growth in revenue and earnings hasn't slowed. For the fiscal year ending in September, I expect revenue between $57 billion and $61 billion and eps ranging between $13.75 and $14.25 per share. The revenue and earnings performance support my 12-month price target issued last October of $300 per share.
There are several variables that will impact Apple's revenue and earnings performance over the next twelve to fifteen months. These variables include but are not limited to the successful launch of the Apple iPad, non-exclusive carrier relationships for the iPhone in the United States (including Verizon), the positive impact of additional Apple retail store locations and rising Mac market share particularly in markets outside the United States. In the most recent quarter international sales accounted for 58% of Apple's revenue.
In developing this price target I relied heavily on statistical trends and the likelihood of continuing strong gross margin ratios due to the positive impact of the Apple iPhone and iPad as well as increasing contributions to revenue from iTunes store sales.
For the 12 month-period ending in March 2011, I forecast revenue of $66 billion and eps of $17.45. Based on a trailing p/e multiple of 22 times earnings (similar to today's multiple) I've established a 12-month price target of $384 per share by the end of April 2011.
The price target takes into account the time needed for the financial markets to receive and respond to Apple's March 2011 quarterly results.