2024 is set to be a turbulent year for the Apple Inc (AAPL) share price. For the first time in years, Apple has been dethroned by Microsoft (MSFT) as the most valuable company in the world. The margin is razor thin though, MSFT’s market cap totalling $3.01 trillion versus Apple’s $3 trillion.
Not that Apple is slipping – AAPL recently toppled the Korean chaebol Samsung as the world’s largest phonemaker in 2023 – but it is worth noting that Microsoft’s share price has been climbing much faster than Apple’s recently (see below).
Specifically, investors liked Microsoft’s deepening involvement with the up-and-coming generative artificial intelligence. ChatGPT is the latest buzzword to conquer the tech world. So powerful is the software that OpenAi (the developer of the product) is valued at a staggering $100 billion. Microsoft is fully employing the software’s capability in its products, for example Azure Open AI service.
Meanwhile, Apple was hit with a sales ban on its smartwatch during the critical Christmas season. Furthermore, the US Department of Justice is preparing to throw the all-powerful antitrust legal proceedings against Apple. At the same, investors are wondering aloud if the economic slowdown in China will drag Apple’s future growth. All of this negative sentiment is taking a toll on Apple’s share price.
Can Apple’s share price double in 5 years?
Against this darkening backdrop, can Apple double its market cap from the current $3 trillion to a mammoth $6 trillion?
Where, we ask, will Apple’s growth come from?
In 2023, Apple was already the world’s largest smartphone maker, shipping 234 million smartphones to customers worldwide. While Apple’s hardware revenue is worth nearly $300 billion annually, Apple’s SAAS sales is also expanding rapidly. Last year, this department racked up sales north of $80 billion. The Apple ecosystem is entrenched and looks set to generate further growth in the years to come.
While China slows, Apple’s sales in India are growing faster than expected. In October, the tech giant registered six straight quarters of higher revenue in the country – a remarkable set of results. India’s rapid pace of industrialisation is enlarging the cohort of the middle class in the country which, in turn, is leading the ‘premiumization’ of phone ownership. Apple is capturing this trend well.
Yes, the Cupertino-based company is lagging somewhat in the AI race, but Apple has a powerful lead in its internally-controlled silicon chips. Look at the speed Apple is introducing its M-series products, many of which are industry-leading.
Given Apple’s strong ecosystem and positive network effect, it is unsurprising to see Warren Buffett predict that “I know where Apple will be in five or ten years.” Profits for Apple in 2023 topped nearly $97 billion! Only one company – Saudi’s state-owned Aramco – out-earns Apple.
That said, will Apple’s share price double from here? Perhaps – but the timing of this happening is highly uncertain. I really wouldn’t know when or if this will happen in 1, 5 or even 10 years time. The reason is that gaining another $2-3 trillion from here is much more difficult these days. Imagine the amount of buying needed to move the stock. In comparison, there are many beaten-down (vastly smaller) stocks which could land a double bagger for investors faster. At $3 trillion, one has to take the Buffett stance and wait patiently for the reward. Who knows, over the long term AAPL may even exceed one’s expectations.
All in all, Apple is highly valuable (the best brand in the world), profitable, and is undoubtedly in a cyclical upswing.
Will Apple reach $500 per share?
Chartwise, Apple is in a medium-term uptrend. Its share price has been rock solid since 2022 despite the volatile macro conditions.
Prices did correct to $120 at the end of 2022 – a 33 percent drawdown from its 2021 peak – but this decline was temporary and it fully recovered last year. Apple’s share price, along with other Big Tech stocks, is now on the cusp of establishing new all-time highs. This setup increases the possibility of future gains.
Will AAPL hit $500? Possibly. However, this optimism needs to be backed up by certain conditions. One, current macro conditions have to stabilise and improve. Two, investors continuing to reward Apple for its earnings growth, in the way of price-earnings expansion.
Currently, Apple trades at around 30x P/E. Imagine the scenario if Apple suddenly trades at 50x P/E. A surge in market optimism like this will set the stock on fire but this optimism requires a bullish sentiment and loose monetary policies.
Is Apple worth investing in?
Based on Apple’s share price trend, yes I’d consider going long AAPL. This is because Apple’s prices are flirting with record highs. Stocks that are near all-time highs often go on to rally further due to an absence of sellers.
But one has to bear in mind that Apple has already had a long bull run. Warren famously bought Apple back in 2016 when its a) valuation was much cheaper and b) prices just had a 12-month correction.
To gain a favourable risk-reward ratio Apple investment, I would wait for a price correction to buy more shares for the same amount. But these corrections may not always come. So the trick is to have a foot in and watch to buy more when Apple’s share price corrects to a “buy zone”. I can be sure that Warren Buffett will be looking to increase his 6% AAPL stake if prices are right too.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
