Should you buy Apple stock (AAPL)? The iPhone maker on Monday became the first company in history to hit a $ 3 trillion valuation when its stock hit $ 182.86 and ended the day at $ 182.01, up 2.5%.
While the $3 trillion market cap milestone is an impressive accomplishment, driven by successful new product launches, including its pivotal iPhone 13, there are questions being raised suggesting this will be as good as it will get for Apple stock which has outperformed the market since early December. “It’s a remarkable milestone that took decades to accomplish,” said longtime Silicon Valley analyst Tim Bajarin, of consultancy Creative Strategies. “Apple has other new products in the works that should help it to continue to grow market share and market cap.”
As the the pandemic has fueled demand for technologies to enable work-from-home and learn-from-home, Apple has delivered strong revenue growth across all of its major products and services, driven by iPhones, Macs, and iPads. Calling the $3 trillion milestone a “watershed moment,” Wedbush analyst Dan Ives noted “Being the first company to join the $3 trillion club is a “flex the muscles moment” for [Apple Chief Executive Tim] Cook and company.” Adding, “The company continues to prove the doubters wrong with the renaissance of growth story playing out in Cupertino.”
But not everyone feels as optimistic about Apple’s prospects. Some investors are, understandably, wondering what the next big growth driver will be for Apple stock. Since reaching the $2 trillion market cap, Apple’s growth has been spurred by its success in the Services business and its wearables. When the company released its Q4 results in October, Apple Services — which includes the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings — surged 26% year over year to $18.3 billion.
But as the market speculates about Apple’s future and the long-term strength of iPhone sales, there are several reasons for investors to want to bite into Apple shares now. Let’s evaluate Apple’s risk/reward profile with a few scenarios I expects will propel the momentum forward: I expect Apple to announce blowout first quarter results in January. Estimates calls for the company to have sold more than 40 million iPhones during the all-important holiday quarter. Notably, this is despite the near-term supply chain challenges.
What’s more, driven by the recent surge in 5G-enabled devices, there’s a great chance that Apple might have grown market share in China, its second-largest market. Elsewhere, Apple is rumored to be launching a AR glasses of its own in 2022, and is also vying for the metaverse space. The company’s investments over the years in consumer hardware given Apple a strong advantage over its competitors in this arena — a business that could boost the company’s value by $20 per share, according to Dan Ives.
Last but not least, there’s Apple’s interest in developing an electric car to compete with, among others, Tesla (TSLA). A Reuters report suggests not only is Apple moving forward with its autonomous car technology, the company is targeting 2024 as the year the car would hit the road. Reuters noted that the company has established various OEM partners for autonomous system components, including lidar sensors, which enables vehicles get a three-dimensional view of the road.
It remains to be seen what Apple decides to do in these areas, but betting against Apple at any point over the past two decades hasn’t been profitable for anyone. While the stock might need to take a breather in the near term, Apple’s balance sheet — which includes more than $200 billion in cash and investments and $104 billion in operating cash flow — fortifies and de-risks any chance of weakness in the business in 2022.