Valuing Apple (AAPL): Upside Seen to $300 Per Share

March 16, 2010 3:32 PM EDT

Due to enormous success of the iPhone, the continued dominance of the iPod and the halo-effect seen for the Mac, there is little doubt that Apple (Nasdaq: AAPL) is hitting on all cylinders. Now add into the mix the new iPad, which will officially go on sale April 3rd, and you have the recipe for a "must own stock."

But with a market cap over $200 billion, making it the 3rd largest in the U.S., investors have to begin to ask themselves - "Is there any more upside left?"

Apple is currently trading at 19x the 2010 consensus EPS estimates of $11.64. The company also has cash, cash equivalents and marketable securities at December 26, 2009 of $39.82 billion.

Here is where analysts value the stock:

• Piper Jaffray has $284 price target based on 25x their FY10E EPS of $11.36. The firm rates the shares at Overweight.
  
  
• Deutsche Bank has a price target of $250 based on ~17x CY10E EPS x-cash (or ~15x CY10 EV/FCF); the lower end of its historical 12-70x FTM PE. The firm rates the shares a Buy
  
  
• Broadpoint AmTech has $280 price target based on 22x their 2010 EPS of $12.75, which increased 6% due to an increase in expected iPad unit sales. The firm rates shares a Buy.
  
  
• Canaccord Adams has a $250 price target which implies a multiple of 18x their FTM EPS estimate (ex. cash). The firm rates shares a Buy.
  
  
• Kaufman Bros has a $253 price target based on 19x their CY10E EPS of $11.08 plus $43 in net cash. The firm rates shares a Buy.

If you notice, all the analysts are getting to their price targets based on 2010 EPS numbers. Apple is currently nearing the completion of its second quarter, so it may be appropriate for investors to start valuing the company based on the 2011 number which is $13.27. In addition, with the upside from Apple's earnings momentum, and if the iPad is a hit, it is easily in the realm of possibility for Apple to earn $13 per share this year, not next.

Based on these two points, it would seem entirely appropriate for investors to tag a 20x multiple on the $13 EPS number, which would equal $260. If you add in the cash of $43 per share you get a price of over $303 per share.

Based on this, investors should feel comfortable buying the stock up to $300 per share. This provides 34% upside to the current market price of $224.

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• Piper Jaffray
• Deutsche Bank
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• Canaccord Adams
• American Technology Research

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