Apple’s market value increased by almost $1 trillion this year. In 2024, these kinds of gains will be more elusive, according to reports.
The world’s most valuable publicly traded company faces uncertainty in China as government agencies are clamping down on foreign-made devices as it attempts to stop four consecutive quarters of declining revenue. Days before Christmas, there could be a US ban on Apple’s smartwatch business, and competition from Huawei Technologies is growing.
Due to investor bets that the maker of the iPhone will continue to generate large profits regardless of the state of the economy, the stock has rallied 50% this year, putting it in expensive territory. It is valued at nearly twice its 10-year average, or 29 times projected profits for the upcoming year.
Accuvest Global Advisors portfolio manager Eric Clark, who has reduced his holdings in Apple and a few other large tech companies said: “The biggest risk for the business model of the megacaps right now is money rotating to other names.”
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Predicted move of investors
Clark observes that investors may shift their money to “other areas that I think might have more upside for 2024” in response to megacaps that are subject to higher valuations, slower growth, and more difficult year-over-year comparisons.
Since the US Federal Reserve increased interest rates this year, investors have remained loyal to blue-chip tech stocks. Now that there are indications that rates may have peaked as inflation declines, investors are growing more interested in riskier stocks as the rally gains momentum.
Any Apple growth would probably need to be fueled by an acceleration of profits due to stretched valuations. According to the average of analyst estimates, Wall Street is currently projecting revenue growth of just 3.7% and profit expansion of 7.6% in the fiscal year 2024.
The reason behind the cooling enthusiasm among analysts is the contrast between the firm’s rise to a market value exceeding $3 trillion and its cautious growth outlook.
While Wall Street is almost universally positive on big tech, they are more cautious about Apple. There are just 34 buy-equivalent recommendations for the stock. That is minuscule compared to the bullish ratings of 67 on Amazon.com, 65 on Meta Platforms, and 59 on Nvidia.
Not all, though, are pessimistic. According to Daniel Ives, an analyst at Wedbush Securities, the stock’s market value will reach $4 trillion by the end of the following year. His street-high price target of $250 soars above the average analyst expectation of $199.
“While there are lingering worries around iPhone shadow government bans in China, for now, this issue is very containable and has not dented demand for Cupertino in this key region based on our recent checks,” Ives wrote in a note, referring to the California-based firm’s headquarters.
The difficulties do not change Accuvest’s Clark’s opinion that the iPhone is “the greatest consumer staple that’s ever been created” and that, as a result, a “higher multiple is warranted.”
Details on the current worth of Apple
The most valuable publicly traded company in the world, Apple, is continuing its upward trend. The market value of the maker of the iPhone is getting close to that of France, the biggest stock market in Europe, after closing at a record high on Wednesday, December 12, 2023.
As of Wednesday’s close, the combined market value of the Paris-listed companies was approximately US$3.2 trillion, while the value of the technology giant was $3.1 trillion. Apple surpasses all but the six biggest global stock markets in terms of size.
The Cupertino, California-based business has previously outperformed Paris in terms of value. During the second-half selloff of the previous year, when central banks increased interest rates to combat inflation, the two frequently switched positions.
This week has seen a record high in the French stock market, driven by luxury goods companies such as LVMH, the owner of Louis Vuitton, and Hermes International, the maker of Birkin bags. Beginning in the middle of the year, the stocks began to decline, but in recent weeks, they have begun to rise once more as evidence has mounted that inflation is slowing and, as a result, interest rates may have peaked, with no signs of a US recession.
The same environment in the US has led to a fresh upsurge in technology stocks, particularly those of the largest corporations. With a more than 50% increase in 2023, Apple’s market value increased by nearly $1 trillion.
Apple’s recent rise represents a significant reversal from October when worries about revenue growth and sales in China put pressure on the stock.
Based on the average of analyst estimates, Wall Street predicts that the company’s revenue will pick up speed again in 2024 as demand for laptops, computers, and smartphones recovers.