Sunday, November 14, 2010

CY 2011 AAPL Price Forecasts and Price Targets

Yesterday I posted my preliminary estimates for Apple's revenue and earning performance in the December quarter (Apple FQ1 2011). I'm following up that post today with my early calendar year 2011 share price forecasts and price targets. By this time next year I expect AAPL to be trading above $500 per share. 
FY 2011 Revenue and Earnings Estimates
It's challenging to forecast Apple's revenue and earnings twelve months out from today considering the dynamic nature of the company's revenue mix. My early revenue and earnings estimates have a conservative bias. I expect to update these price forecasts and price targets on a periodic basis as we move through the fiscal year.
In FY 2010 (ended in September) Apple achieved revenue growth of 52% and earnings per share growth of 67%. The earnings performance benefitted from comparatively high gross margins in the first three quarters of the fiscal year and dramatic reductions in the company's effective tax rate to an average of 24.5% for the year. 
For  FY2011 I estimate Apple will achieve roughly a 60% increase in revenue to about $105 billion with a fairly commensurate rise in earnings per share to about $24. Although we will witness a reduction of operating expenses relative to revenue, lower gross margins and tax rates similar to the rates realized in FY2010 will moderate the rise in eps relative to revenue growth in FY2011.
The Apple iPad Factor
Although Apple achieved a 52% rise in revenue in FY2010, the Apple iPad (device sales and related accessories) represented 7.6% of the company's reported revenue for the fiscal year and contributed about 11.6% of the 52% growth in revenue. In other words, absent the Apple iPad from the revenue mix, revenue growth for the fiscal year from product lines in the marketplace at the start of the fiscal year was a little over 40.4%. In fiscal year 2011 Apple iPad-related activity will fuel revenue growth above FY2010's pace of growth and will represent between 17% and 20% of this fiscal year's reported revenue. Combined, the Apple iPad and the iPhone will represent over 60% of the fiscal year's reported revenue. 

Earnings Growth and the Share Price
At Friday's closing price of $308.03, AAPL is trading at a price-earnings multiple of 20.33 times trailing 12-month earnings. My early calendar year 2011 share price estimates and forecasts are based on a narrow trading range of roughly between 20 times and 22 times trailing 12-month earnings. I expect the share price to rise with reported earnings. Overall market conditions might positively or negatively impact the timetable for share price to reach the estimated price targets.

My Early AAPL Price Forecasts and Price Targets
The table below indicates my current price forecasts and price targets for calendar year 2011. The price forecasts are my anticipated trading ranges for the share price by target date and the target price represents the middling point in each trading range. 
CY 2011 AAPL Price Forecasts and Target Prices
Date  Low High  Target

02/1/2011      346          380             363
05/1/2011      386          424             405
08/1/2011      428          471             449
11/1/2011      483          532             508
By this time next year I expect AAPL to be trading above $500 per share. The share price appreciation will be fueled by Apple's consistent revenue and earnings growth throughout FY2011 and the shares will reach my $508 target price without an appreciable expansion of the current price-earnings multiple of just over 20 times trailing 12-month earnings. The Apple iPad and its contributions to the company's revenue and earnings growth during all four quarters of FY2011 will be the catalyst for the share price move above $500. This post updates my September share price forecast
Robert Paul Leitao


  1. Very nice work Robert!

    Looking forward to your ongoing updates.

    Also, at some point in the future I'm wondering if you plan on putting out some analysis of the impact SJ's "retirement" would have on aapl? JMO, but other than a Black Swan event I see the SJ issue as the biggest threat to aapl.


  2. I sure hope you are right, but one always has to worry about SJ health.
    Also, I would like to how the competition comes up with their products and how AAPL will fight them off. So far they have been able to thrive,but I would like to see an improved iPad and see next years iPhone go on without a hitch.
    Otherwise I am rooting for your forcast.

  3. Anonymous:

    I've listened to most of the Apple quarterly conferences with analysts since the calls have been broadcast over the Web. Apple has a very strong management team in place and the company will move beyond the eventual retirement of the co-founder and CEO of Apple.

    In watching Steve Jobs over the past several months his health appears to have improved in a dramatic way and I expect him to remain actively involved at Apple for at least the next few years. His vision will continue to drive innovation at the company.

  4. David:

    The iPad is an extraordinary device and we will no doubt see updates to the product line in the years ahead. The currently annual iPhone model refresh is complicated by the levels of product demand. I expect next year's early summer refresh to be less of an issue. The publication of the iPhone 4's features month ahead of release skewed demand and further complicated the refresh cycle.

  5. Robert,

    Your posts on Apple are so useful to us all.

    Although I would use the lower range of your estimates, due to the market misunderstanding of Apple, it seems clear that one could expect 400 after next Octobers earnings report.

    All the best!