Apple (AAPL) Tops $300... Next Stop $500

Back in March, when shares of Apple (Nasdaq: AAPL) were just over $200 per share, StreetInsider.com predicated that the stock would hit $300 per share before long. Well today, Apple hit this milestone for the first time.

The premise of our confidence was that the iPad would be a big hit and wasn't being included in the value of the stock. It turned out that iPad was an even bigger hit than anyone could have imagined, with some analysts now suggesting they could sell 45 million units next year.

Every product Apple introduces is an instant hit, and, as the iPhone 4 showed, updated versions of older products drive people to upgrade. There is little question that Apple has the magic touch.

So while everything appears to be running on all cylinders at Apple, investors have to ask --- "Is there any more upside left?"

Looking at the earnings power of the company, the simple answer is a resounding "YES."

Apple just wrapped up their fourth quarter of FY10 in September, with number coming out shortly. Analysts expect the company to earn $4.03 for the quarter and $14.50 for the year.

Shares of Apple currently trade at 21x this FY10 EPS number.

With FY10 over though, investors need to look out to FY11 --- which has already officially started for Apple.

For FY11, the EPS consensus is $17.89, with the high estimates at $21.64 and the low at $13.83. Apple currently trades at about 17x the FY11 consensus.

But looking at the 2011 consensus - like the 2010 number --- is is likely too low. When we wrote about Apple in March 2010 the FY10 consensus was $11.64 - now $14.50 is expected for the year. That is 25% higher!

Take this 25% upside and tack in onto the FY11 consensus and you get to a potential FY11 EPS of $22.40.

With amazing iPad numbers, a potential Verizon iPhone launch, the Mac halo effect, and other products, this number is not out of line and should be more considered a "given" than a "stretch."

Now using the current Apple multiple of 17x on this $22.40 EPS number and you get to a price of $380.80. If you use Apple's average multiple of 23x, you get to a price of $515.20. Even if you use a more conservative multiple of 20x, you get to a price of $448.

If these number don't give you comfort, you also have to remember that Apple currently has nearly $47 per share in cash and equivalence and by FY11 analyst expect this to rise to $70 per share.

So any way you look at it, even at $300, shares of Apple have a lot more juice in them.

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