Credit Suisse’s Kulbinder Garcha this morning reiterates an Outperform rating on shares of Apple (AAPL), and a $750 price target, writing that the company is “on track to tap the vast emerging market opportunity,” offering a 22-page deck of slides to bolster his report.
Garcha argues Apple already scooped up $16 billion of the $86 billion in “incremental sales opportunity from emerging markets, long term, over the last 12 months.”
But he thinks Apple can make much more money as the middle class broadens out, mostly in the “BRIC” countries — Brazil, Russia, India and China.
U.S. middle class consumers (if you believe there’s still a middle class in the U.S.) spend an average of $417 on Apple goods per year, he calculates.
If China’s middle class consumers who are comparable in spending ability were to broaden to 244 million by 2015 from 133 million now, it could mean $89 billion in potential revenue for Apple and $21 in earnings per share by 2015.
Garcha also does a back of the envelope for the developed markets, arguing that consumers in Japan and Western Europe still spend less on Apple products than those in North America, which he pegs at about $197 annually per capita.
If those other developed market folks were to raise their Apple spending, it would add up to $69 billion in additional sales for Apple and $19 in profit per share.
Take both emerging and developed markets together and Apple’s EPS could rise from $35 per share last calendar year to “long term EPS power” of $75, on perhaps $286.6 billion in revenue.
By way of comparison, The Street is currently modeling Apple to make $62.20 per share in 2014 on revenue of $227 billion.
Garcha’s key slide is the following, showing the markets potential for revenue and EPS:
Apple shares today are up 59 cents at $572.12.
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