Will Apple Trade for $1,000 a Share? Maybe in a Bubbly, App-Filled World

Last Updated Dec 6, 2010 12:45 PM EST

A blog post Tuesday warns investors to rein in their enthusiasm toward Apple (AAPL). The author, Jason Schwarz, makes the case that Apple's share price, close to its all-time high north of $320, factors in more good news than is likely to occur in coming weeks and does not properly recognize a tendency toward weakness for the stock at this time of year or developments weighing on the broad stock market:

"The Apple death march, mirroring the 2009 end-of-year action, continues. All those investors who are loaded up on [Apple options] - in hopes that the Verizon, China, iPad/iPhone, MacBook Air, Apple TV and earnings catalysts will lift the stock - have failed to identify the current market trend and have failed to accurately interpret historical precedent."
A more bullish, and more typical, point of view comes from Cody Willard, who predicts that Apple will trade for $1,000 a share by "2015 or so." His argument is based on projections for "an installed customer base of 2 billion people using smart phones and the apps that run on them by the year 2020."

That 2 billion figure seems quite high. It's nearly one-third of the human race. If you eliminate children, the very old and the impoverished masses who don't have fresh water or electricity, are there even 2 billion people left?

Even if there are, and even if every last one of them is destined to use a smart phone one day, Willard doesn't seem to be taking into account the likelihood that phones and apps will generate far less revenue per unit than they do now. Gross overestimation of revenues helped create the tech bubble in the late 1990s, and reasoning like Willard's may be inflating a bubble in Apple now.

I've been warning of the possibility that Apple's stock is an accident waiting to happen. I've been wrong so far, although I've been closer to the mark in suggesting that Research in Motion (RIMM) offered lower-risk growth prospects. With a valuation that is barely more than half of Apple's, Research in Motion still seems like the better, safer holding.

  • Conrad Aenlle

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