Apple Shares To Reach $1,000 In 2013

Daniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It happens every year around the holidays, like clockwork. Analysts covering Apple (NASDAQ: AAPL) scramble to raise their price targets as they acknowledge the incredible demand for Apple's products. It's happening again. Analysts see a bright future for Apple in 2013 and are adjusting their price targets accordingly. In fact, this time around, many recently published price targets are coming in around $1,000 per share.

Times are good at Apple
The combination of new Apple products, holidays, and Apple fans is usually directly correlated with good times for Apple investors. Apple customers are often described as cult-like loyalists. Customer satisfaction rates, and retention are the highest in consumer electronics. But best of all for Apple investors, Apple's products are extremely profitable. In fact, 28% of every dollar of Apple revenue over the last 12 months was converted into free cash flow.

Apple's free cash flow average compounded growth rate over the last three years is an astounding 67%. The chart below highlights Apple's growth over the past five years based on four important metrics:

<img src="http://media.ycharts.com/charts/5ebdcdd41ab5ff87844bd8650117e6ee.png" />

AAPL Free Cash Flow TTM data by YCharts

Apple is cheap
Incredibly, Apple trades at a very conservative valuation. Investors claim this is due to the fact that the law of large numbers will inevitably impact Apple in the near future. Though this is a legitimate argument, I don't see growth slowing yet. Plus, once Apple does reach saturation, I see very loyal customers continuing to repurchase Apple products for years to come.

Check out the mind-boggling chart below. Despite wonderful times at Apple, by measure of free cash flow yield, Google (NASDAQ: GOOG), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), and eBay (NASDAQ: EBAY) all trade at a premium to Apple!

<img src="http://media.ycharts.com/charts/63cb911525938803160cdb89415ddeeb.png" />

AAPL Free Cash Flow Yield data by YCharts

An investor who so saw the above chart by itself (with hidden stock names) would not expect Apple to have the qualities of a growth stock. But it does, indeed! In fact, Apple's growth blows Google, Wal-Mart, McDonalds and Ebay away by a significant margin!

<img src="http://media.ycharts.com/charts/f36359c6cdea953ec3beba786c66efec.png" />

AAPL Book Value data by YCharts

The $1,000 club
But this opportunity has not gone unnoticed by everyone. The $1,000 Club debuted when Apple analyst, Brian White of Topeka Capital Markets stepped up as the first to set a price target for Apple of $1,001 in April of 2012. He was then followed by Piper Jaffray analyst, Gene Munster, who set a price target of $910 and expressed that he believes Apple shares will drift to $1,000 by 2014. And most recently, FBN Securities raised their price target from $800 to $1,000 on iPhone 5 demand.

Catalysts
Apple has plenty of potential catalysts for the end of 2012 and for 2013:

My take
Apple stock will hit $1,000 in 2013. Apple's economic moat, growth potential, and likely catalysts are not priced into today's $700 share price. So, maybe Brian White, Piper Jaffray, and FBN Securities can make some room for me in the $1,000 Club, because I'm officially in! What do you think? Let me know in the comments below.

Foolish bottom line
The stakes are high and the opportunity is huge after Apple’s introduction of the iPhone 5, so to help investors understand his epic Apple event, the Fool has just released an exclusive update dedicated to the iPhone 5. By picking up a copy of their premium research report on Apple, you'll learn everything you need to know, and receive ongoing guidance as key news hits. Claim your copy today by clicking here now.


DanielSparks owns shares of Apple. The Motley Fool owns shares of Apple, Google, and McDonald's. Motley Fool newsletter services recommend Apple, eBay, Google, and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus