Piper Jaffray top analyst Gene Munster, one of Wall Street’s most acclaimed analysts who has notably covered Apple Inc. (NASDAQ:AAPL) from his first note in 2004, a full three years before the first generation of iPhone took the market by storm, is writing one last note on his call for the future of the tech giant.
It’s been a passion project for the analyst in many ways, who has been steadfastly bullish on the stock’s prospects in his proud 12 years of coverage. Munster’s prowess in his speculation on Apple and its economic opportunities is time-honored and highly valued on the Street. In 2004, the giant’s share price had not even reached $2 yet. Therefore, Munster has clearly earned his Street cred, as now at the close of 2016, the giant’s stock price is circling $117, almost 60 laps around its budding heyday figure.
So what does the great Gene Munster predict Apple has in store when glancing at a crystal ball misting over the next five years?
Often, when looking ahead, one can glean valuable insight from the past, and for Munster, “not much has changed since 2004” in terms of the two predominant investor concerns: unit growth and innovation. Though the analyst remains firmly in the camp of Team Apple, he thinks the future success of the giant hinges upon “making Services a bigger part of the story,” and transitioning away from a reputation built around cycles of products.
However, for Apple to make the jump from product cycles to a full-fledged “Services” branding, Munster suspects services would have to reach 50% of the company’s total revenue.
“The bottom line is this: Apple has a great Services brand between the App Store, Apple Music, iTunes, etc. For it to get credit for it, the company may have to take unique measures to sell hardware in a different way. It could mean accepting a lower profit margin on hardware by selling the low-end device we expected years ago, but got the iPhone 5C. Or it could mean that they sell a bundled hardware/software package direct to consumers […]” Munster mulls over, adding that while the correct path to be recognized for services remains unclear for now, he bets on Apple’s team to get it right.
With regards to unit growth, not only does the analyst vote more confidence for the iPhone 7 come March and June than the Street, he also has major expectations for the forthcoming 10th anniversary model, anticipating it can be a “compelling” driving factor for sustaining growth numbers.
For his final voice on the matter, the analyst turns to augmented reality as Apple’s future crux of innovation, highlighting various dabbling opportunities for the giant, from a new addition of sensors to instill depth, computer vision-enabling cameras and software, and even potentially new models of the iPhone incorporating external peripherals or wearables like AR or MR glasses- which he surmises could grow to eventually take the iPhone’s illustrious place. From Munster’s standpoint, the road looks infinite, particularly as he believes, “The smartphone remains the world’s window to augmented reality today.”
What could follow in the footsteps of the innovative world of AR? Munster already sees the writing on the wall for Apple’s next platform: the auto-verse, be it a car or software. Even if Apple’s first moves into the automotive sector stand await years in the making, Munster has a habit of calling the shots correctly, especially in his coverage of Apple.
874 notes later, the analyst still believes in the magic and joy that Apple has brilliantly made its hallmark over the years, from the iPod to the iPhone to whatever next-level abracadabra item the giant has spinning in its wheels.
From a nostalgic perspective, the analyst muses once more before passing his baton, contending, “That magic is a big reason why we’ve been unwavering bulls on Apple for almost the entire time we’ve covered it. Sometimes we missed the short-term, but long-term it’s been the right bet. AAPL probably won’t appreciate as much over the next twelve years as it has over the past twelve, but we still believe the company can recreate that magical feeling with some future product and will enjoy watching the stock rise when they do.”
Munster has an excellent standing with TipRanks with a top-notch performance backed by a 65% success rate and a ranking of #14 out of 4,291 analysts. Munster has garnered 16.5% in his yearly returns with an average of 10.0% in profits when recommending AAPL stock.
General consensus sentiment seems to back Munster’s confident forecast for the giant, as TipRanks analytics exhibit AAPL as a Strong Buy. Out of 29 analysts polled by TipRanks in the last 3 months, 24 are bullish on Apple stock and just 5 remain sidelined. With a return potential of 14%, the stock’s consensus target price stands at $133.72.