The key, says Gene Munster, is the iPhone’s addressable subscriber base
Apple’s (AAPL) shares have dropped $24.52 (6.8%) in the past three trading days for reasons that have nothing to do with the company’s underlying business. In a note to clients issued Wednesday, Piper Jaffray’s Gene Munster tries to bring the subject back to Apple’s fundamentals.
Most investors, he writes, believe Apple’s earnings growth will slow to 15%-20% in 2012, and that’s why shares are currently trading at 13 times his relatively conservative earnings-per-share estimate of $26.85 for calendar 2012.
But those investors, he says, are underestimating the company’s opportunity to grow its mobile business over the next five years. Specifically:
- He expects the iPhone, which represents 39% of Apple’s revenues today, to at least keep pace with the smartphone’s current growth rate of 35% per year and sell 200 million units in 2015. That implies that more than 40% of Apple’s revenue stream will grow at the rate of 35% per year from 2013 to 2015.
- He expects the iPad to grow faster than the iPhone, and the Mac and iPod to grow more slowly.
- “The net,” he writes, “is we believe a sustainable 25-30% growth rate in earnings could be achievable through 2015.”
To support his model of iPhone growth, Munster looks at Apple’s addressable market — currently 1.7 billion potential customers — in every country that sells mobile phones, from China to tiny Liechtenstein.
He makes the case that Apple is in a position to significantly expand its subscriber base. The nut graph:
Also on Fortune.com:
- Reports: iPad 2 event set for Mar. 2
- The cost of Apple’s ‘greed tax’
- Erin Burnett: CNBC’s anti-Apple crusader
[Follow Philip Elmer-DeWitt on Twitter @philiped]