Technology investor Gene Munster told CNBC on Thursday that he sees a reasonable way for Apple to reach $ 3 trillion market capitalization in the future.
The iPhone maker became the first publicly traded American company to reach a market value of $ 2 trillion in August – a milestone Munster predicted in January, when he advocated that the shares be traded 50% higher. On Thursday, with its shares at around $ 133 per share, Apple was valued at nearly $ 2.3 trillion.
Munster, who covered Apple as a longtime analyst at investment bank Piper Jaffray, said in the “Squawk Box” that he believes the California-based company can realistically reach $ 200 a share. This would put its market value at more than $ 3 trillion.
“It needs to be anchored in profits. This is the powerful part of Apple’s story,” said Munster, who co-founded venture capital firm Loup Ventures. He said his forecast is based on Apple’s trading in a price / earnings ratio, or multiple, from 35 to 2022 earnings estimates.
“It’s a year out there, but I’m moving the conversation forward to a half and a half next year, and we’ll be talking about 2022 at that point. If the market can sustain these 35 multiples – you know, we’re not talking about a multiple similar to Amazon here – I think that path is there, “said Munster.
Apple’s current price-to-earnings ratio is almost 41, after stocks soared about 81% this year. Amazon, which has seen its shares rise about 76% this year, is trading at about 95%.
A catalyst that can help propel Apple is the wider adoption of remote work spurred by the coronavirus pandemic, said Munster.
“This is generally seen as a move on the iPhone, a move on 5G. This is good. It will have a positive impact on the numbers, but this acceleration of digital transformation, I think is powerful,” said Munster. “People who work from anywhere will arm themselves in the next 12 to 24 months, buying more Macs, iPads, services.”
Munster also echoed his belief that Apple’s multiple could withstand even greater expansion as investors reconsider the company, which in recent years has been pushing to generate more service revenue to increase its hardware sales.
For his part, Munster said he believed Apple could leverage its hardware business on a service, such as purchasing a Mac by subscription. “We believe this is coming, and more talk about automobiles is a great opportunity for Apple’s multiple,” said Munster, referring to reports about Apple’s potential to make an electric car in a few years.
More generally, he said he believed Apple would continue its strong stock performance in 2021, especially compared to its so-called FAANG brothers. In addition to Apple, the group of technology companies also includes Amazon, Facebook, Alphabet, Google’s parent company and Netflix.
“We believe there will be a new fragmentation of FAANG,” said Munster, with Facebook and Netflix behind Apple and Amazon. “I think in 2021 the performance will come again from Apple. It may seem deaf for a company to lead FAANG for three years in a row, but I think it will actually happen. I think it has a range of $ 200 [per share]. “