As Apple (AAPL) and Exxon Mobil (XOM) battle it out for the right to be called the largest stock in the world by market cap, the oil giant can still stake claim to being the first company to breach the $500 billion threshold back in 2007. Exxon's brief trip to the valuation stratosphere was fueled by record oil prices, while its return to earth has been more gradual and prolonged, where its market cap is roughly $390 billion.
For Apple to get there, it will require about a 37% rally from current levels as well as an assumption that strong demand for iPhones and iPads will continue to drive record profits. William Power, senior analyst at Robert W. Baird is among the believers. In the wake of Apple's first quarterly sales and earnings miss in a decade, he didn't run, he doubled down and raised his earnings estimates and price target.
Officially, Power pushed his 2012 FY EPS estimate up by 8% to $37.46, whichis about 8% above consensus according to Factset. At the same time, he raised his 12-18 month price target to $540 from $525 a share, well ahead of the median price target of $507. Interestingly, Factset data show of 51 analysts who cover Apple, six have even higher price targets than Power, with Brian White of Ticonderoga Securities on top with a $666 price target.
"Ultimately, it comes down to the product roadmap and how the products resonate with customers," Power tells me in the attached video. "As I look at the growth opportunity in front of them, from a revenue and earnings perspective, you can make a very good case for the stock trading at least at a low to mid teen multiple and that gets you up to over $500."
Apple is among an elite few stocks right now that is not only delivering strong top and bottom line growth but is also seeing analysts estimates revised higher. For example, the current full year 2012 EPS consensus estimate for Apple is $34.50. That's up 56% from just 12 months ago when consensus was $22.03, according to Factset.
There are two budding trends that analysts say could turbocharge existing estimates: Tapping into the low-end consumer and achieving widespread corporate acceptance. "Apple today has only about 5% penetration of the global cell phone market," Power says. "So there's still pretty significant upside."
Power is particularly interested in demand for the "old iPhone" 3GS, which for the first time ever is being offered for free with a 2-year contract at AT&T (T). On the commercial side, the analyst says the recent service outage of Research in Motion's (RIMM) Blackberry service could hasten the entry of iDevices into the corporate world.