Gene Munster: The case for Apple at (gulp) $200

From a note to Loup Ventures subscribers that landed on my desktop Tuesday:

What may seem even more out of touch with reality is the case that Apple’s market cap can exceed $3.5 trillion in the next two to four years. The magnitude of that number is mind-numbing, with no historical precedent. There is also no historical precedent for the scale of tech adoption that is currently underway. While the velocity of this adoption will subside somewhat with an effective vaccine or better treatments, the transformation is underway nonetheless.

Applying a 35x multiple to our 2022 Apple EPS estimates of $5.50, which is about 17% above the Street, yields a share price of about $200. Apple has not traded at a 35x forward EPS multiple since the glory days of the iPod when the overall business was growing greater than 35%. While we expect revenue growth over the next several years will be closer to 10%, the underlying reliance the world will have on Apple products justifies, in our view, a multiple well above revenue and earnings growth rates.

Fortunately, there are precedents related to this low growth high multiple dynamic. Companies that are woven into the fabric of our lives — companies like Coca Cola and Clorox — see normalized growth rates in the high single digits but trade at 23x to 27x next year’s earnings. Over the next few years, we believe Apple will gain a place alongside these critical companies in the minds of investors with revenue growth in the low teens and a forward EPS multiple in the mid-30s.

My take: Remember, Munster’s is talking about 2022.