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Tech investor Gene Munster told CNBC on Thursday that he sees a reasonable path for Apple to reach a market cap of $ 3 trillion in the future.
The iPhone maker became the first publicly traded U.S. company to reach a market cap of $ 2 trillion in August – a milestone Munster predicted in January, when he pleaded for a 50% rise in the market. action. Apple was valued at nearly $ 2.3 trillion on Thursday, with its stock at around $ 133 a share.
Munster, who has covered Apple as a longtime analyst at investment bank Piper Jaffray, said on “Squawk Box” that he believes the California-based company can realistically hit $ 200 a share. That would put its market cap at over $ 3 trillion.
“It has to be rooted in earnings. It’s the strongest part of Apple’s story,” said Munster, who co-founded venture capital firm Loup Ventures. He said his prediction was based on trading Apple at a price-to-earnings ratio, or multiple, of 35 for the 2022 earnings estimates.
“It’s been a year, but I’m quickly moving the conversation to the middle and back half of next year, and we’ll talk about 2022 at that point. If the market can support those 35 multiples – you know, we’re not talking about an Amazon-like multiple here – i think that path is there, ”Munster said.
Apple’s current price-to-earnings ratio is near 41, after the stock has climbed around 81% this year. Amazon, which has seen its stock rise by around 76% this year, is trading at a multiple of around 95.
One catalyst that could help propel Apple higher is the wider adoption of remote working spurred by the coronavirus pandemic, Munster said.
“This is generally seen as an iPhone game, a 5G game. It’s good. It’ll have a positive impact on the numbers, but this acceleration of digital transformation, I think it’s powerful,” Munster said. “People who work from anywhere are going to arm themselves in the next 12 to 24 months, buy more Macs, iPads and services.”
Munster also reiterated his belief that the Apple multiple could resist further expansion as investors reconsider the company, which in recent years has pushed to generate more revenue through services to increase hardware sales.
For his part, Munster said he believes Apple could leverage its hardware business in a service, such as buying a Mac with a subscription. “We believe this is happening and that more and more auto talk is a great opportunity for Apple’s multiple,” Munster said, alluding to reports that Apple could potentially make an electric car in a few months. years.
More generally, he said he believes Apple will continue its strong stock market performance in 2021, especially compared to its so-called FAANG brothers. Besides Apple, the tech group of companies also includes Amazon, Facebook, Google-parent Alphabet, and Netflix.
“We believe there will be another FAANG divide,” said Munster, with Facebook and Netflix lagging behind Apple and Amazon. “I think for 2021 the performance will come back from Apple. It might sound deaf for a company to run FAANG for three consecutive years, but I think it will actually happen. I think this has a $ 200 trail [per share]. “
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