Technology investor Gene Munster told CNBC on Thursday that he sees a reasonable way for Apple to reach a market capitalization of $ 3 trillion in the future.
The iPhone maker became the first U.S. listed company to hit a $ 2 trillion market cap in August – a milestone that Munster predicted in January, when it claimed shares would trade 50% higher a lot. As of Thursday, with its shares at around $ 133 a share, Apple was valued at nearly $ 2.3 trillion.
Munster, who hedged Apple as a longtime analyst at investment bank Piper Jaffray, told Squawk Box that he believes the California company can realistically reach $ 200 a share. That would put its market capitalization at over $ 3 trillion.
“It needs to be anchored in earnings. This is the strong piece about Apple’s story,” said Munster, who co-founded venture capital firm Loup Ventures. He said his prediction is based on Apple trading at a price-to-earnings ratio or multiple of 35 for 2022 earnings estimates.
“It’s been a year there, but I’m quickly sending the conversation to the middle and middle of next year and we’ll talk about 2022 at that time. If the market can support these 35 multiples – you know, we’re not talking about an Amazon-like multiple – I think that way is there, “Munster said.
Apple’s current price-earnings ratio is almost 41, after the stock increased by about 81% this year. Amazon, which has seen a 76% increase in shares this year, is trading with about 95 multiples.
One catalyst that could help propel Apple above is the wider adoption of remote work stimulated by the coronavirus pandemic, Munster said.
“Overall, this is considered a piece on the iPhone, a 5G piece. It’s good. That will have an impact on the numbers in a positive way, but this acceleration of the digital transformation, I think, is strong,” Munster said. “People who work from anywhere will be in arms for the next 12 to 24 months, buying more Macs, iPads, services.”
Munster also reiterated its belief that Apple’s multiples could withstand further expansion as investors reconsider the company, which in recent years has pressed for more revenue from services to boost its hardware sales.
For his part, Munster said he believes Apple could use its hardware business in a service, such as buying a Mac on a subscription. “We think it’s coming, and more talk about cars is a great opportunity for Apple’s multiples,” Munster said, referring to reports that Apple could produce an electric car in a few years.
More generally, he said he believes Apple will continue its strong stock performance in 2021, especially compared to the so-called FAANG brothers. In addition to Apple, the group of technology companies also includes Amazon, Facebook, Google-parent Alphabet and Netflix.
“We believe there will be a new fracture of FAANG,” Munster said, leaving Facebook and Netflix behind Apple and Amazon. “I think that by 2021, the performance will come again from Apple. It may seem deaf to a company to run FAANG for three years in a row, but I think it will actually happen. I think this has a $ 200 route [per share]. “