Apple (AAPL 1.19%) is sizzling hot these days. Shares of the technology giant have skyrocketed by nearly 50% year to date. It also just became the first publicly traded company to achieve a market cap of over $3 trillion.
Can Apple keep the momentum rolling? Here's how much higher Wall Street thinks Apple stock will go in the next year.
NASDAQ: AAPL
Key Data Points
Bullish blahs
Wall Street is definitely bullish about Apple. Of the 38 analysts surveyed by Refinitiv recently who cover it, 11 rate the stock as a strong buy. Another 21 recommend buying the stock.
That leaves only six analysts who aren't as supportive. But even among that group, there aren't any who believe that Apple will underperform or recommend selling the stock.
While Wall Street is generally bullish about Apple, though, analysts aren't overly optimistic about the stock's prospects in the near term. The average 12-month price target is actually 2% below Apple's closing price from Monday's abbreviated trading session.
Sure, there are some more exuberant outliers. Citi analyst Atif Malik thinks the stock could jump by nearly 25%. However, the consensus seems to be that Apple's upward potential is limited at best.
Behind the lack of enthusiasm
Why don't analysts think that Apple's tremendous momentum from the first half of 2023 will continue? Its valuation is a key factor.
Apple's shares currently trade at a forward price-to-earnings ratio of nearly 29. By comparison, the S&P 500's forward earnings multiple stands at a little over 19.
UBS analyst David Vogt downgraded Apple from buy to neutral last month. Although Vogt acknowledged that the stock deserves a premium valuation, he believes that the company's "growth is likely to remain under pressure."
Another firm, D.A. Davidson, also downgraded the stock in June from buy to neutral. The concern behind this downgrade was that the potential for Apple's new Vision Pro mixed-reality headset is already priced into the stock.
Is Wall Street right?
Apple makes up a bigger percentage of my portfolio than any other individual holding (excluding exchange-traded funds). It's also my longest-held position. I like the stock.
However, I understand Wall Street analysts' reluctance to predict that the stock will move higher. Remember, their price targets are for the next 12 months. A lot could happen during that period. The U.S. economy could enter into a mild recession by early 2024. Even if it doesn't, the tech-fueled stock market rally could fade, causing Apple's shares to pull back.
I also recognize that Apple's valuation is higher than it has been in years. That factor alone could limit the stock's ability to deliver significant gains over the near term.
Looking to the future
That said, I think there's a good reason why so many analysts still rate Apple stock as a buy or strong buy despite their unambitious 12-month price targets. My hunch is that they fully expect the stock to continue its winning ways over the long run.
Wedbush Securities' Dan Ives makes a pretty good bull argument for Apple beyond the limited period for Wall Street's price targets. He predicts a "massive renaissance of growth over the next 12 to 18 months."
Ives noted that around one-fourth of Apple's customers haven't upgraded their iPhones in more than four years. He thinks that some of the more bearish analysts have "severely underestimated the massive installed base upgrade opportunity."
Apple's services business is especially worth watching, according to Ives. He also has great expectations for the Vision Pro. Ives believes that the headset could have "thousands of use cases." He also thinks that the "bigger story" with the Vision Pro is the potential for an expanded app store that gives Apple a significant competitive advantage.
Ives even projects that Apple has a chance of hitting a market cap of $4 trillion by 2025. Perhaps that's overly optimistic, but I wouldn't bet against it.
