It might be tempting for investors to rule out many "big tech" companies as good investments in 2024. After all, a handful of the world's biggest tech companies were a key driver to the tech-heavy Nasdaq Composite's monstrous 43% gain last year. Indeed, shares of Apple (AAPL 0.01%), Microsoft, and Alphabet rose 48%, 57%, and 58%, respectively, in 2023. But the reality is that these companies likely deserve their current valuation. Going further, all three of these stocks may actually be compelling investments today.
To this end, one analyst recently took a surprisingly bullish stance on one of these three juggernauts: Apple. Wedbush analyst Daniel Ives said in late December that he expects the iPhone maker to command a $4 trillion market capitalization and a price of $250 by the end of 2024.
Let's take a look at why this analyst is so bullish on Apple stock and consider whether or not he is onto something.
NASDAQ: AAPL
Key Data Points
Growth will return
Ives, who calls Apple stock a "top tech pick," believes the tech company will show off its resilience in 2024 with an iPhone business returning to growth by continuing its strong service momentum.
Though Apple's total sales in fiscal 2023 fell compared to the prior fiscal year, trends improved throughout the year. Indeed, Apple's iPhone business actually returned to revenue growth in the fiscal fourth quarter; total iPhone revenue for the period was $43.8 billion, up from $42.6 billion in the year-ago period. With the segment accounting for more than half of Apple's annual sales, a return to growth in iPhone revenue is good news for shareholders.
"iPhone revenue came in ahead of our expectations," said Apple CEO Tim Cook in the company's fiscal Q4 earnings call, "setting a September quarter record as well as quarterly records in many markets, including China Mainland, Latin America, the Middle East, South Asia and an all-time record in India."
Better yet, Apple CEO Luca Maestri said the company expects growth from the iPhone again in fiscal Q1 -- the company's biggest seasonal quarter for the year since it includes the holidays.
Additionally, Apple's thriving services segment grew 16% year over year in fiscal Q4 despite continued macroeconomic challenges in some areas of the segment. Maestri said he expects momentum from the lucrative segment to persist in fiscal Q1.
Buy the dip
But are these catalysts enough to justify the stock's valuation of about 30 times earnings today? When viewed alongside bull cases for the stock, like the company's long track record of good capital-allocation decisions, a $51 billion net-cash position, and the optionality for new potential product lines over the next decade, I think the answer is yes.
With Apple shares falling several percentage points on the first trading day of the year, it may be a good time to buy shares of one of the most resilient tech companies in the world. Could shares rise to $250 by the end of the year like Ives thinks they will? It's possible. But investors who buy shares shouldn't be looking for a quick fix. As always, investors who buy stocks should have long time horizons -- typically, five years or more. Over this horizon, Apple stock looks poised to do well.
