Apple (AAPL 3.71%) became the first publicly traded U.S. company to hit a $1 trillion market cap in August 2018. It also became the first to cross the $2 trillion mark in August 2020, and the first to reach the $3 trillion milestone in January 2022.
Apple's market cap is still hovering near the $3 trillion mark as of this writing, but could it maintain its biennial tradition and hit a $4 trillion market cap by 2024? Let's review its past growth, projected growth rates, and valuations to decide.
Image source: Apple.
How did Apple become a $3 trillion company?
Between fiscal 2017 and fiscal 2022 (which ended last September), Apple's annual revenue rose at a compound annual growth rate (CAGR) of 11.5%. Meanwhile, its split-adjusted earnings per share (EPS) grew at an even higher CAGR of 21.6%.
In other words, Apple's annual EPS nearly tripled from fiscal 2017 to fiscal 2022 -- so it makes sense that its stock price nearly quadrupled over the past five years. However, Apple's valuations have also risen at a faster rate than its actual profits. On the last day of fiscal 2017, Apple's stock traded at $154.12 ($38.53 on a split-adjusted basis), which was only 13 times the diluted EPS of $11.91 it would generate in fiscal 2018. Today, Apple trades at 28 times forward earnings.
Apple's path from $1 trillion to $3 trillion was paved by both its own EPS growth and its rising valuations. Its earnings growth was driven by its robust sales of iPhones (which still account for over half its revenue), iPads, Macs, and the expansion of its services segment with more subscription-based services. Its valuations rose as more investors turned to Apple as a safe-haven bet while the pandemic, the Russo-Ukrainian war, inflation, and rising interest rates rattled the broader markets.
Apple's EPS also usually grows at a faster clip than its net income because it buys back billions of dollars in shares every year. It repurchased 19% of its shares over the past five years, as well as a whopping 38% of its shares over the past decade.
How could Apple become a $4 trillion company?
For Apple to reach a $4 trillion market cap by the end of 2024, its stock would need to rise nearly 40% over the next 18 months. That could be quite difficult, for two simple reasons.
First, analysts expect Apple's EPS to dip 2% in fiscal 2023, rise 9% in fiscal 2024, and grow 10% to $7.17 per share in fiscal 2025. Assuming Apple still trades at 28 times forward earnings by the beginning of fiscal 2025, its stock would only be trading 9% higher at about $200 -- which would give it a market cap of just under $3.2 trillion.
Second, Apple's valuations are historically high -- so we could see its forward multiple drop back to 20 during a market downturn. If that happens, Apple's stock could decline to the mid-$140s, and its market cap would shrink to about $2.2 trillion.
Pay attention to the wild cards
Based on analysts' estimates, which we should take with a grain of salt, it seems unlikely that Apple will reach a $4 trillion valuation by the end of 2024. However, those forecasts don't account for all the wild cards that Apple can still play.
Apple's upcoming rollout of the Vision Pro headset in early 2024 will mark its first major hardware launch since its introduction of the Apple Watch in 2015. Its high price tag of $3,500 might limit its initial appeal, but a stronger-than-expected launch could drive analysts to boost their revenue and earnings estimates.
Apple also ended its latest quarter with 975 million paid subscriptions across all of its services, which represented 18% growth from a year ago. That massive audience gives it plenty of room to launch new apps and services.
Lastly, Apple is still sitting on $166 billion in cash and marketable securities. It could deploy a lot of that cash on fresh investments and acquisitions (perhaps on media companies for its services ecosystem or some chipmakers for its first-party chips).
Look beyond Apple's market cap
I believe Apple will eventually be worth $4 trillion one day, but I don't expect it to reach that milestone by the end of 2024. Instead, investors should simply recall that Apple generates stable growth, commands fierce customer loyalty, locks in its customers with sticky services, and rewards its patient investors with buybacks and dividends. All of those strengths make Apple a great long-term investment -- regardless of how much the entire company is actually worth.
