According to a recent note from Fairlead Strategies, technology and consumer electronics giant Apple Inc. (AAPL) could witness a major upside in its stock. According to the agency, the stock has confirmed its breakout above the record high of $183. Consequently, its shares could jump to $254 by the end of 2024.
Given that this is one of those relatively-rare occasions in the world of investment research in which a forecast has been accompanied by a time horizon, in this piece, we evaluate the likelihood of this upside which could elevate iPhone maker’s market capitalization from its current levels of $2.96 trillion to $4 trillion.
AAPL has a lot going for it at this point in time. Its fiscal second-quarter earnings exceeded Street expectations, driven by stronger-than-expected iPhone sales.
The company, which has a history of revolutionizing products like the personal computer, smartphone, and tablet, has begun scripting the next key chapter in its success story with the announcement of its first product in the AR/VR market, the Apple Vision headset, which will sell for $3,499 when it is released early next year.
In addition, AAPL also announced its partnership with the game-development software maker Unity and unveiled a slew of other new products. Its year-ahead product roadmap includes the new Apple Watch Ultra along with the traditional fall launch lined up for the iPhone 15.
The company is also reportedly beginning work on two new and bifurcated product lines, one second-generation high-end model that will be the continuation of the original Vision Pro and the other a lower-end version. It is also expected to ship new M3-powered laptops, and new OLED-screen iPads will ship by next year.
The Catch
With a strong product portfolio and a healthy pipeline, there seems to be little, if any, that can hinder AAPL’s progress from strength to strength. However, the company isn’t immune to macroeconomic headwinds.
AAPL reported $24.16 billion in net income during the quarter compared to $25.01 billion in the previous-year period. Moreover, sales have declined for two straight quarters, with total revenue down 3% from $97.28 billion in the prior quarter.
With macroeconomic challenges in digital advertising and mobile gaming, part of AAPL’s services business, finance chief Luca Maestri said the company expects overall revenue in the current quarter to decline about 3%.
Hence, brand equity apart, AAPL is quite an expensive stock to own based on fundamental financial performance.
Pros Outweigh Cons
Regardless of the near-term and temporary softness and slowdown, traditional valuation metrics seem inadequate to gauge the quality of a compounding machine such as AAPL, which boasts a sticky user base with a retention rate of over 90% that assures the company adequate cash flow through repeat purchases and upgrades.
Moreover, AAPL’s board authorized $90 billion in share repurchases and dividends. It spent $23 billion in buybacks and dividends in the March quarter and raised its dividend by 4% to 24 cents per share.
Through relentless share repurchases, the company increased the existing shareholders' stake by decreasing its float.
By decreasing the number of outstanding shares, AAPL has been increasing the remaining shares' intrinsic value (and consequently the price) without a proportional rise in market capitalization. AAPL’s current market cap is $2.96 trillion, with 15.79 billion shares outstanding, compared to a market cap of $2.97 trillion, with 16.33 billion shares outstanding as of January 3, 2022.
Bottomline
Given the above, if the Federal Reserve and other major central banks manage to engineer the much coveted ‘soft landing’ and all else remains (at least) equal, there is a significant likelihood that AAPL can achieve a record share price by the end of 2024.
