The Apple share price will reach $200 24 months from now.
That's what I told FOX Business anchor Stuart Varney Monday when he asked me how I felt about Apple Inc. (Nasdaq: AAPL).
But here's what I couldn't say: the Apple share price could get there even faster.
The Cupertino giant sold nearly 1 million watches on a pre-order basis last Friday and may sell as many as 20 million units within 12 months - and probably closer to double that once production ramps up. At between $350 and $17,000 each, it may not move the needle much on a company that booked $182 billion last year... but that's not really the point.
What matters is that the Apple Watch may be a "cell phone killer."
Not a lot of people are thinking about this right now. To them the Apple Watch is another timekeeping device, a duplicate smartphone, or simply a gimmick used in conjunction with your iPhone.
I see things very differently.
For me, the real mojo will hit about six to 12 months from now. That's when we'll see any number of really innovative applications roll out from the likes of BMW, Facebook Inc. (Nasdaq: FB), United Continental Holdings Inc. (NYSE: UAL), and others.
How the Watch Will Drive Up the Apple Share Price
My expectation is that companies like these (who have been toiling away under conditions akin to the Manhattan Project in WWII) are going to produce a revenue model that's not yet fully understood.
I can see medical reminders for everything from appointments to medications on board. Already you can store QR codes and load your Starbucks Corp. (Nasdaq: SBUX) card, bypassing your wallet.
And Apple Watch includes the Passbook app imported from the iPhone, which keeps your airline tickets, coupons, boarding passes, and movie tickets easily at hand.
The watch could even take on a life of its own, becoming a Star Trek-like communicator capable of linking, exchanging, storing, and acting upon all near-field data.
Beam me up... at least to Cupertino. The Apple Watch makes a trusty Submariner look... well, dumb.
Remember, the Apple Watch is part of a much bigger play to establish the Apple ecosphere. The idea is to help users share the same data across multiple platforms free of charge. That, in turn, naturally aids in both customer acquisition and retention.
Factor in a cash war chest of about $178 billion, and Apple's intuitively usable devices suddenly take on a new perspective. It makes the Apple share price look dirt cheap today and a $1 trillion market cap absolutely obtainable.
If you don't yet own Apple stock, now's a great time to add to shares and tuck them away.
Making Steve Jobs Jealous: Apple is legendary for its fat profit margins, but the margins on the Watch will outshine even those of the flagship iPhone. Even the low-end watches could have profit margins higher than the iPhone. But the gold edition will have margins deep in luxury territory...
Follow me on Twitter @DavidGZeiler.
Here Are 10 “One-Click” Ways to Earn 10% or Better on Your Money Every Quarter
Appreciation is great, but it’s possible to get even more out of the shares you own. A lot more: you can easily beat inflation and collect regular income to spare. There are no complicated trades to put on, no high-level options clearances necessary. In fact, you can do this with a couple of mouse clicks – passive income redefined. Click here for the report…
Keith,
I thought i read that you said Apple is something you wouldn't recommend as there is no longer a Steve Jobs and other factors? I have been reading your reports since i signed up to your newsletter, But can you tell me an actual Company or Stock that makes the 50% part of the pyramid as well as the 40% part.
I turned to 'about the author' for a revelation about how many AAPL shares he owns, but i don't see it.
Hi Jo.
Thanks for asking.. I have no personal interest in Apple and am not compensated for recommending the company in any way shape or form.
Unlike Wall Street, which frequently trades against clients or even many other newsletters for that matter, there is no hidden agenda here. Our goal is to provide the very best unbiased research we can. That’s why everyone on our team – not just me – is subject to policies against personal compensation and ownership because that is the best way to eliminate potential conflicts of interest.
Best regards and thanks for reading Money Morning,
– Keith :-)
UNPREDICTABLE APPLE
In all fairness Keith, I believe market sentiment has influenced people's short term expectations as least as much as Apple's new products or their future potential.
I am always a bit leery of precise price predictions as the future remains a mystery. Apple stock in particular has bedeviled so many analysts. In a way, Apple is a "Joker in the Deck". It can and does surprise, as well as disappoint on occasion. CEO Tim Cook has gone from "Zero to Hero" as his company's stock has increased since last Summer.
Anyway, for Apple to go up that much in just a couple of years would also require the stock market to rise in sympathy. Any kind of bear market or large correction would affect when $200/share is realized, but so would Apple not attaining rising expectations of the market. Its not nice to disappoint Ms. Market.
Mike Larson at Money and Markets wrote this today:
"Alibaba Group (BABA, Weiss Ratings: C) has been a disaster following a brief, post-IPO surge in October and November. So you really do have to know what you’re investing in before committing your hard-earned money to a new stock."
Money Morning Staff were " All-in" last year with the Alibaba IPO and after it began trading. ( One of the Underwriters was the Rothschild Group). Bill Patalon and Keith FitzGerald were highly recommending investors buy-in now and hold in their feature articles here. Clearly, exuberance is contagious. So, Be careful who you listen to.
Actually, don't listen to anybody. Make-up your own mind and only after you do your own due diligence ( Warren Buffet's Advice). Clearly, like most IPO's, it has performed poorly in its first year or so. Same thing happened with Facebook. Since Alibaba IPO was bigger, it will probably take longer for those who paid $90 to be made hole.
Weiss Investments rates BABA only a "C". Even Mad Money's Jim Cramer said last year he though BABA would make a decent long term investment at around $80.00/share. I concur on that one so far.
How much is apple stock currently?
AAPL is trading at about $130 a share.
WHY APPLE STOCK MAY DISAPPOINT MANY
I see issues with Apple, principally that 55% of their revenue still comes from 1 product: the I-Phone 6. Currently a hit in China, it now has become 27% of their mobile phone market. China is also 20% of their revenue, and growing. While I share Keith's views on China's growth- long term, the intermediate term is far less certain. This is especially true as far as it concerns Apple.
The I-Watch is going to take longer than a year to show that it can become a major contributor to Apple's bottom line and top line. It may or may not prove to be the "must have" that everyone is currently betting on. As far as Apple Ecosystem, that depends on how it further evolves and its future functionalities. All remain unknowns.
So, for now, overall market (negative) sentiment is keeping a lid on Apple stock to below $134. For Apple to break-out and stay above its current 52-week high, it will need the tailwind of a bull market, especially in the tech. space (sector) it occupies. Right now, 23% increase in recent quarterly earnings is not enough to bring-in more buyers or entice them to bid the price up much more. Neither was a very modest dividend increase and stock buyback program ( funded by borrowing overseas).
Financial engineering is slowly replacing the spark of innovation that once was Steve Jobs. The Bull Market is getting a bit old. Most importantly, more FED stimulus is in order for U.S. Markets. Any signal of either QE-4 or the tacit admission that an interest rate increase is no longer in the cards given the "macroprudentials" ( whatever that is ). The FED is an indicator, not the key. Investor sentiment is key, not fundamentals.