Late December 1, Dan Ives of Wedbush announced on Twitter his revised target price for Apple shares (AAPL) – Download the report from Apple Inc.: $ 200 apiece. At these levels, Cupertino shares would be worth over $ 3.2 trillion over the next 12 months – a new target on the street.
Apple Maven talks about how the AAPL could reach those levels. Can investors be in a good stock market that will push Apple shares 20% higher?
(Read more from Apple Maven: Apple shares on the moon? Impressive race at the end of November)
iPhone at the heart of the case
According to a tweet from Dan Ives, the key drivers that could send AAPL over an estimated $ 3.2 trillion are the same ones that support the recently discussed analyst thesis about the bull. The iPhone 13 cycle will be at least as strong as Wedbush predicted, and better than most analysts expected.
About a week ago, I was debating how Wall Street was slowly warming up to the idea that heavy composers and bottlenecks in the supply chain might not be enough to ruin Apple’s holiday quarter. Based on projections of Ives Day’s unit delivery of 40 million iPhones between Black Friday and Christmas, I estimate that segment revenue in the first fiscal quarter could grow 10% this year.
Currently, analysts expect Apple to deliver earnings per share for fiscal 2022 of $ 5.70, suggesting the stock is trading at a P / E of 29 times this year. Don’t be confused, this is a multiple fortune. But by the end of next year, investors should start valuing Apple stocks multiple times their earnings from 2023, or 27 times.
Counting on expanding the valuation, in this case, could be a bit strained. It seems to be the perfect scenario for Apple now: low interest rates, successful product cycles (iPhone, Mac, iPad and beyond), a defensive game against the fear of COVID-19, etc.
But that doesn’t mean Apple can’t deliver financial results above expectations, which will increase the stock price. I think this is even more likely if the Cupertino-based company announces its mixed-reality devices in the second half of fiscal 2022, as some believe is the case.
(Read more from Apple Maven: Apple Stock: Immune to Omicron fears)
The first step back?
However, I have a problem with the idea that Apple shares could jump from $ 166 per share to $ 200 next year.
As I said earlier today, the AAPL has surpassed the S&P 500 (SPY) – Get the SPDR S&P 500 ETF Confidence Report since mid-November at most in the last year. While some may think the recent increase is justified, history suggests that a short-term withdrawal from the broad market is certainly not out of the question.
Based on my research, the average excess return (i.e. above the S&P 500) of holding AAPL in any three-week period over the past five years was + 1.3%. However, that number drops to -0.5% when the AAPL topped the SPY by more than 10 percentage points in the previous three weeks.
In plain English, Apple shares have historically performed worse than the S&P 500 in the short term if they even exceed the benchmark by a large margin in the recent past. This is exactly the current setting.
I’m not necessarily skeptical about the $ 200 target price for 2022. However, for the above reason, I think AAPL could take a step back first, at least relative to the broad market, before moving more by the end of next year.
A new street price target for Apple shares has been offered: $ 200. How long do you think it will take for AAPL to climb 20% and reach a market capitalization of $ 3.2 trillion implied by this price target?
Is the price correct?
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(Disclaimer: This is not investment advice. The author may have one or more shares mentioned in this report. Also, the article may contain affiliate links. These partnerships do not affect editorial content. Thank you for supporting Apple Maven)
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