Over a week after releasing a report calling for a $1 trillion valuation of Apple Inc. AAPL 1.82%, analysts at FBR Capital issued another report answering some common questions investors have asked about Apple and defending FBR’s $1 trillion valuation call.
In the new report, FBR analysts address critics of the bold prediction and clarify their vision for Apple’s path to $1 trillion.
Can Apple Watch Succeed As A New Product Category For The Company?
Analysts believe that the strength of the Apple brand and the size and loyalty of its customer base makes a strong case for mainstream adoption of the Apple Watch.
Regardless of the ultimate success of Apple’s new watch, analysts believe that the wearable technology wave provides “a massive land grab opportunity in technology.” Whether it be via the Apple Watch or other Apple hardware and/or software, analysts believe that Apple is in prime position to capitalize.
At Its Size, Can Apple Continue To Deliver Solid Execution/Growth?
Despite many initial critics of the new CEO, Apple has doubled revenue and earnings per share since the Tim Cook era began in August of 2011.
FBR is calling for a compound annual revenue growth rate of 8 percent over the next decade. While analysts admit that the iPhone segment accounting for over half of Apple’s revenue is subject to “fickle customer preferences,” they believe that the true advantage Apple has over its competition is its integrated software environment and its services segment.
Can The Company Continue To Garner Success With Its All-Important iPhone Product Cycles?
Eight years after the introduction of the first iPhone, analysts see no signs of slowdown in the iPhone update cycles in developed markets and point out that developing markets, such as China, are “in the very early innings of another major growth opportunity.”
What’s In Store For Investors Around Apple’s Capital Allocation Plans?
Analysts expect an update on the capital allocation plan to come sometime in April.
Analysts believe that a third consecutive April dividend hike is likely. With the company’s projected $65 billion in 2015 free cash flow, analysts also see plenty of room for additional buybacks.
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