Apple Inc. is anticipated to become the world's first company to achieve a valuation of $3 trillion, but the journey to this unprecedented milestone is not straightforward.
In the latest trading session, Apple's share price hit an all-time high of $183.79 per share, surpassing its previous record close of $182.01 per share set on January 3. According to Dow Jones market data, if Apple closes at $190.73 per share, it would reach a historic market capitalization of $3 trillion.
Unfortunately, Apple couldn't sustain the upward trend and ended Monday down 0.3%, with a further 0.13% decline in after-hours trading. So far this year, Apple's shares have surged 47%, pushing its market capitalization to $2.88 trillion, a hair's breadth away from the $3 trillion threshold.
With the generative AI boom, Apple, alongside other tech stocks, has been steadily rising. Its strong iPhone sales, robust earnings, and the recent introduction of its "most powerful headset," VisionPro, have significantly contributed to its performance.
Optimistic analysts suggest the iPhone and services businesses could be the key catalysts propelling Apple's market cap to $3 trillion. In a research report on June 7, Wedbush analyst Dan Ives estimated about 250 million consumers have older iPhones and have not upgraded their phones for at least four years.
Ives anticipates the iPhone 15 will persuade these consumers and loyal iPhone users to purchase new phones and allocate a larger budget for it. He also stated that Apple's future undervalued "star business" isn't VisionPro but its services business, which includes AppStore, Apple TV, and other subscription products. He predicts this year, Apple's services business revenue could approach $100 billion, in comparison, in 2020 it was $50 billion. Ives set a target price for Apple stock at $220 per share, well above Monday's closing price.
However, not all analysts share Ives's optimism. A research report from Itaú BBA in Brazil on June 5 noted that while Apple's VisionPro may change the company's game in the long run, revenue from these sales might take time to materialize. They set a target price for the stock at $140 per share, well below the average.
On Monday, UBS analyst David Vogt expressed concern that iPhone sales and service business revenue might slow down. He noted that recent UBS research suggests a slight reduction in the number of consumers planning to purchase an iPhone in the next 12 months compared to data from six months ago.
He suggested that "tough competition, macro headwinds, and a slowdown in iPhone install base growth will cause a significant slowdown in service revenue growth for fiscal years 2023 and 2024."
Apple's high valuation was also a factor in Vogt's downgrade. Apple's forward price-to-earnings ratio is 28.6, noticeably above the stock's historical average of 22.7. He believes this valuation is too high and does not yet reflect investors' pricing of VisionPro.
Vogt downgraded Apple stock from a buy to neutral but raised the target price from $180 per share to $190 per share.
