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Apple worth $1 trillion looks ready to happen

Apple market cap

It's one week from the arrival of Apple's (AAPL) iPhone X. If you're one of the lucky few (like me) to get yours, you already know: The magic is back.

After years of tepid innovation after the iPhone 6, this is the first time since Siri appeared on the iPhone 4s that I felt the tinge of being wowed. The speed and effortlessness of Face ID. The luxurious full-body OLED screen. The front-and-rear Portrait Mode. Oh, baby.

And it likely sets the stage for Apple to become the world's first company with a $1 trillion market capitalization, which would require a rally to only around $195 per share from near $175 now. Just an 11 percent gain. For context, the shares are up nearly 17 percent from their September low (chart below).  


Despite the questionable decisions over the iPhone 8 (why not 7s?), Apple Watch 3 celluar connectivity issues and iPhone X supply chain woes, Wall Street is getting bulled up once again. RBC Capital Markets analysts are looking for double-digit earnings-per-share growth over the next two years. They see that coming from higher average iPhone selling prices (iPhone X starts at $999 vs. $618 average iPhone selling price last quarter), a mix shift toward high-margin services (App Store and Apple Music) and the possibility of tax reform out of Washington.  

On that last point, Apple is holding $262 billion in cash and cash-like investments, much of it offshore. With Republicans in Congress looking to lower the corporate tax rate and establish a reduced short-term repatriation rate, a sizable portion of that hoard could be domesticated -- and then returned to shareholders as dividends or share buybacks. Possibly as a special one-time dividend.

Two major doubts are fading: The company's ability to reaccelerate iPhone demand (amid worries about market saturation) and a return to growth in China. Disappointment with the iPhone 7 last year resulted in a 12 percent year-over-year decline in iPhone revenues. The March 2018 quarter should see growth of 19 percent as iPhone X supply catches up with demand, according to RBC. 

Last quarter, Greater China sales increased 12 percent. Even before the iPhone X launched.

Upside kickers include reports Apple is looking to bring Face ID and full-body screens to the iPad, efforts in augmented reality and virtual reality, and the coming launch of the Homepod smart speaker. $1 trillion cometh. 

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