AAPL 12-Month Price Targets

AAPL 12-Month Price Targets

On February 1st I posted a five-quarter review of Apple's price-earnings multiples with and without the company's burgeoning cash balances factored into the share price valuations. Over a one-year period ended on February 1st, Apple's share price rose 77% against a 75% rise in reported earnings per share.

Looking forward 12 months to February 1, 2012, I anticipate about a 70% rise in Apple's share price to $590. This is based on an expectation of a continuing rise in quarterly earnings per share at a pace close to the 75% realized in the December quarter for the balance of FY2011 with strong eps growth continuing through FY2012. 

The dates chosen for the quarterly price targets represent the first trading day of the month following the release of Apple's quarterly earnings reports, providing time for the markets to adjust the company's valuation based on the the most recent quarterly numbers. 

The graph below illustrates the growth in Apple's share price over the past four quarters and my quarterly target prices for the next 12 months. The table data provides a delineation of the share price changes over the past four quarters and the share price changes projected in my estimates. 

				Quarterly
	Date	Price	Target Price	Price Change
	2/1/10	194.73
	5/3/10	266.35		36.78%
	8/2/10	261.85		-1.69%
	11/1/10	304.18		16.17%
	2/1/11	345.03		13.43%
	5/2/11		405	17.38%	Projected
	8/1/11		454	12.10%	Projected
	11/1/11		519	14.32%	Projected
	2/1/12		590	13.68%	Projected

Irrational Markets, Irrational Prices

Few hold illusions the equity markets rationally price a company's shares at a specified date in time or will rationally price shares at a particular future date in time. There's no practical way to forecast the impact of world events or other influences on share price valuations. The price targets are estimates developed through models that forecast where AAPL is expected to trade based on past performance and anticipated future quarterly results. 

I do not expect AAPL to trade higher in a straight linear line. To accentuate this point I've added a linear line to the chart used above to demonstrate the share price performance over the past four quarters. For the purposes of developing a price target model, the projections are based on a uniform movement in the share price in response to anticipated earnings growth. AAPL's actual performance will most likely differ from the projections in terms of the share price valuation on any of the selected dates but over a one-year period the share price will essentially rise on a determined path in response to earnings growth. 

Conclusion

Over the past four fiscal quarters AAPL has moved higher on average in direct response to the rise in earnings per share. Please see my recent blog post titled Apple's P/E Multiple With And Without Cash In The Valuation for more information. Based on anticipated earnings per share growth near the 75% rise realized in the December quarter, I expect AAPL to reach $590 per share on or before February 1, 2012, representing a roughly 71% increase in value in one year's time and in synch with the anticipated rise in earnings per share. 

While the market may award a higher or lower valuation to the shares at different times over the next twelve months, I do not expect a material and sustained expansion in the current price-earnings multiple over the next year. I expect the shares to trade higher in response to growth in earnings per share. 

Robert Paul Leitao