Technical investor Gene Munster told CNBC on Thursday that he sees a reasonable way for Apple to reach a market capitalization of $ 3 billion in the future.
The iPhone maker became the first listed US company to reach a market capitalization of $ 2 billion in August – a milestone that Munster predicted in January, when it would trade the case 50% higher. With a share price of about $ 133 per share, Apple was valued at almost $ 2.3 billion as of Thursday.
Munster, who treated Apple as a long-time analyst at investment bank Piper Jaffray, said on Squawk Box that he believed the company could reach $ 200 a share in California. That would put its market capitalization at more than $ 3 billion.
“It needs to be anchored in earnings. This is the powerful piece about the Apple story,” Munster said. He was co-founder of the venture capital firm Loup Ventures. He said his forecast is based on Apple’s trading at a price-to-earnings ratio, or multiple, of 35 for 2022’s revenue estimates.
“It’s a year out there, but I’m moving the conversation quickly to the middle and half of next year, and we’ll be talking about 2022 at that point. If the market can sustain these 35 multiples, you know, we’re talking not here of an Amazon-like multiple – I think the road is there, ‘Munster said.
Apple’s current price-to-earnings ratio is close to 41, after the stock rose about 81% this year. Amazon, which has seen its share rise by about 76% this year, is trading at about 95 times.
One catalyst that could help drive Apple higher is the greater use of remote work spurred on by the coronavirus pandemic, Munster said.
“It’s generally considered a play on the iPhone, a 5G play. That’s fine. It’s going to affect the numbers in a positive way, but this acceleration of digital transformation, I think it’s powerful,” said Munster. “People working from everywhere are going to get up in the next 12 to 24 months and buy more Macs, iPads and services.”
Munster also reiterated its belief that Apple’s multiple could withstand further expansion as investors reconsidered the company, which has been pushing for more revenue from services over the past few years to increase hardware sales.
Munster, in turn, said he thinks Apple could use its hardware business in a service, such as buying a Mac on a subscription. “We believe it’s coming, and talking more about cars is a big opportunity for Apple’s multiplicity,” Munster said, referring to Apple’s possible production of an electric car within a few years.
More generally, he said he believes Apple will continue its strong share performance in 2021, especially compared to its so-called FAANG brothers. In addition to Apple, the technology group also includes Amazon, Facebook, Google parent Alphabet and Netflix.
“We think there will be a further break from FAANG,” Munster said, with Facebook and Netflix lagging behind Apple and Amazon. “I think the action for 2021 is coming from Apple again. It may seem deaf to a company to lead FAANG for three consecutive years, but I think it will actually happen. I think it has a track record of $ 200 [per share]. “