Is Apple $1 Trillion Valuation Just 18 Months Away?

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Earlier this month, Apple Inc. (NASDAQ: AAPL) topped $800 billion in market cap, the first publicly traded company ever to reach that milestone. Since then — and even before — many observers have speculated on when the company would become the first company to reach a market valuation of $1 trillion.

RBC Capital Markets analyst Amit Daryanani thinks Apple could reach that level in the next 12 to 18 months. In an excerpt from Daryanani’s research note cited by MacRumors, he explains:

In aggregate, we see a scenario where in the 2019 fiscal year, Apple sustains $12+ earnings per share and, assuming the valuation frameworks remains stable/improves, it should get AAPL stock toward $192–$195, which would equate to a market cap above $1 trillion.

Apple’s 2019 fiscal year begins in October 2018, about 18 months from now. In order to reach $1 trillion by then, the company’s compound growth rate would need to be about 7.4%. That’s every month, not yearly.

Could that possibly happen? Since the beginning of this year, Apple shares have risen just over 32%, or nearly 7.2% month over month through April. At the end of December 2016, the company’s share price was about $116, and at Friday’s close the stock price was just pennies shy of $153.

Daryanani explained that the new iPhone due this fall, dubbed the iPhone 8, and a burst of upgrade demand (an “upgrade supercycle”) due to a growing base of older iPhones and new features like OLED displays, 3D sensors and wireless charging are expected to be a “major catalyst” on the road to a $1 trillion valuation.

Longer term, the RBC analyst sees Apple’s services revenue growing fast:

[W]e think there is potential for Apple to continue growing Services revenue by double digit year-over-year given the company’s expanding installed base [of devices], increasing App Store sales within the current installed base, demand for cloud storage/compute services, and further adoption of Apple Pay.

Apple’s stock traded up about 0.4% at $153.64 Monday morning, in a 52-week range of $91.50 to $156.65. The consensus 12-month price target on the stock is $154.36.