Apple’s share price reached an all-time high on Wednesday, bringing the tech giant within striking distance of a remarkable $3 trillion market capitalization. The iPhone maker’s stock closed at $189.25 per share, up 0.6% daily. At that level, the company would become the world’s first publicly traded company worth $3 trillion – more than half of the $6.4 trillion American taxpayers have spent on wars since 2001.
It’s only 17 months since Apple became a $2 trillion business, and the milestone comes amid renewed investor enthusiasm about tech stocks and optimism for artificial intelligence. The stock has surged this year, boosted by bets that the Federal Reserve will soon wrap up its campaign of interest rate hikes and by enthusiasm for new product releases.
In addition, the company has been able to boost earnings and profits even as demand for its products has waned in recent years, thanks to the strong economy and its prodigious cash flow that has enabled it to invest in growth and return cash to shareholders through dividends. For example, Apple’s latest quarterly report in May showed that revenue and profit had declined but still outperformed analysts’ predictions. These financial results and a long stock buyback record have helped solidify the tech giant’s reputation as a safe investment in this period of global economic volatility.
As a result, investors are paying up for the opportunity to invest in Apple’s future growth. The stock is currently trading at around 29 times projected future earnings, which is the highest multiple that it has seen in almost two years, according to Refinitiv data quoted in a Reuters report. That’s still a significant discount from the multiple of 44 that Apple was trading at just over a year ago. Still, it suggests that investors are highly confident that the company will be able to continue growing its revenues and earnings.
Despite the lofty valuation, many analysts are cautious about the stock’s prospects. A team of analysts at UBS cut their rating for Apple to neutral from buy and warned that its revenue growth in the second half of 2023 could fall below expectations. They said that “soft demand trends and a 50% premium to the mkt [market] = unfavorable risk/reward.”
Meanwhile, Rosenblatt analyst Barton Crockett cautioned that even at $3 trillion, Apple’s stock “bar is set low to excite investors,” considering that its services and wearables businesses have yet to prove their mettle. He believes those businesses will significantly impact future earnings more than the iPhone, but investors should expect sales of both to slow this year. The analyst also cited soft demand trends in China as another reason for the cautious stance on shares.
