Breaking Down Apple’s Historic $3 Trillion Push
Apple (AAPL:US) made history last week when it became the first publicly-owned company to secure a daily close above the $3 trillion threshold.
The record highs in Apple stock came despite an aggressive rate-hiking campaign conducted by the Federal Reserve, including recent comments that the central bank is likely to continue increasing rates as inflation figures aren’t dropping as quickly as expected.
“The Apple bears and skeptics continue to scratch their heads as many have called for Apple’s ‘broken growth story’ this year in a tougher backdrop to which we firmly believe the exact opposite has happened with Cupertino heading into a massive renaissance of growth over the next 12 to 18 months,” Dan Ives, a senior equity research analyst at Wedbush Securities, said in a note last week.
After Apple’s market cap exceeded $3 trillion, the stock price now continues its march toward $200 a share. This is also benefiting some Congress members, who have been acquiring Apple shares in recent months.
The list includes Representatives like Nancy Pelosi, Ro Khanna, Josh Gottheimer, Kathy Manning, Daniel Goldman. Most notably, Rep. Nancy Pelosi and her husband Paul recently exercised options to acquire 5,000 AAPL shares at a strike price of $80.
iPhone ‘Supercycle’
iPhone shipments annually - Source: Counterpoint
The majority of AAPL stock gains in the previous decade and more have been driven by the monstrous sales of the company’s flagship product – the iPhone. When Apple reported on its January quarter performance back in May, the company said its iPhone sales were $51.33 billion, representing a portion of 54.1% compared to the total revenue of $94.84 billion.
The prior quarter’s earnings report was again highlighted by robust iPhone sales, which grew year-over-year despite the broader smartphone industry seeing lower figures given a tough macroeconomic environment. For the quarter to April 1, iPhone sales rose 2%.
“It was quite a good quarter from an iPhone point of view, particularly relative to the market when you look at the market stats,” CEO Tim Cook told CNBC.
For years, Wall Street analysts “warned” that Apple is preparing for an “iPhone supercycle,” driven by the 5G adoption. Apple is hoping to replicate strong years, like 2015 or 2017, when the company managed to sell 77 million devices in a single quarter.
“In our opinion the Street has severely underestimated the massive installed base upgrade opportunity around iPhone 14 and now a mini super cycle iPhone 15 ahead with roughly 25% of Apple’s golden customer base not upgrading their iPhones in over 4 years,” Ives added.
While Apple is selling fewer devices this time, it is benefiting from the better price mix i.e. the higher demand for pricier iPhone models such as iPhone 14 Pro Max.
"We believe Apple's fair valuation could be in the $3.5 trillion range with a bull case $4 trillion valuation by FY25," Ives also said.
Services, Vision Pro, Apple Car
While iPhone sales continue to underpin Apple’s robust financial profile, the company has been investing billions in new initiatives. Just recently, Apple presented Vision Pro, the extended reality (XR) headset with a starting price of $3,499.
“Today marks the beginning of a new era for computing,” said Tim Cook, Apple’s CEO. “Just as the Mac introduced us to personal computing, and iPhone introduced us to mobile computing, Apple Vision Pro introduces us to spatial computing.”
Although the company has already experienced production issues and was reportedly forced to sharply cut its 2024 production targets due to supply constraints, analysts are hoping that the AR/VR sales can boost Apple’s finance in the mid-term.
Media also heavily speculates about the Apple car, an electric, next-gen vehicle that could hit the streets as soon as 2026. The car is expected to have a high focus on technology and design with Apple looking to partner with a traditional carmaker when it comes to the powertrain and batteries.
In the meantime, Apple will continue to rely on iPhone sales and the fastest-growing segment – Services, which generated $20.91 billion in sales for the second calendar year of 2023. The Services business, which includes monthly subscriptions and the App Store segment, rose 5.5% quarter-over-quarter. Services is known to be the highest-margin business for Apple and any increase in its sales is evident in Apple’s profitability and overall margins.
Final Words
Once Apple stock breached the resistance, centered around the previous record high, it was evident that the bulls are heading towards the $3 trillion threshold. The basic technical analysis rules say that any break of the former resistance shifts that level into support, as long as the price action is taking place above this level.
Apple daily chart (Source: TradingView)
Any pullback in Apple stock is likely an opportunity for bulls to buy shares near this support at $183 while the bulls target the next resistance – the 127.2% Fibonacci extension line that is located around the $200 mark.
