Barclays On Apple: 'Follow The Free Cash Flow To $150'

Ben Reitzes of Barclays on Monday commented in a note that Apple Inc.'s (NASDAQ: AAPL) "extraordinary" level of free cash flow and its potential impact on share prices may not be fully appreciated by investors.

"The December quarter free cash flow figure of $30.5 billion or $5.19/share was likely in the range of 35 percent above consensus, while earnings per share was only 18 percent above," Reitzes wrote. "Our forecasts for free cash flow of $63 billion (or nearly $11/share) in 2015 and $66 billion (or nearly $12/share) in fiscal 2016 – are looking conservative, with even more upside than our earnings per share estimates given the negative cash conversion cycle."

Reitzes argues that even using these "conservative" figures, shares of Apple are "cheaper" on an EV/FCF basis compared to "almost any other meaningful bellwether" – not just in tech.

Bottom line, the analyst believes that Apple's multiple could further expand with increased cash returns and higher recurring services revenue streams (such as Apple Pay) that carry "very favorable" incremental margins while closing the gap further with Google Inc's (NASDAQ: GOOG) (NASDAQ: GOOGL) multiples.

Shares are Overweight rated with a $150 price target.