24/7 Wall St.

Apple Inc. (NASDAQ: AAPL) shares generated a return of 12.5% in 2016, with its shares ending the year at $115.82. The Dow Jones Industrial Average (DJIA) closed out the year 2016 up 13.4% at 19,762.60 on December 30. It may not have hit the elusive 20,000 mark, but there is a case for Dow 22,000 in late 2017 or in 2018. The S&P 500 closed 2016 up 9.5%, and the Nasdaq lagged in 2016 with a gain of just 7.5%. Standard & Poor’s reported in December that the S&P 500 was expensive by historic standards with a valuation of almost 17.5 times forward 12 month earnings.

24/7 Wall St. evaluates each of the 30 DJIA components at the start of each year in an effort to generate upside or downside calculations. This of course matters for each stock, but it is also the basis for evaluating a year-end target ahead for the broader index. Analysts were far more positive a year earlier, but the same analysts (and some new ones) are still looking for above-average gains in Apple in 2017.

What investors need to consider is that Apple shares had been negative in the first half of 2016. A total return of 22.06% in the second half of the year changed all that. Apple’s consensus analyst target price of $131.96 at the end of 2016 would imply simple upside of 13.9%, but its 2.0% yield would make for an implied total return of 15.9%, if the analysts get 2017 more accurate than they predicted for 2016.

Another consideration is that Apple’s more positive analysts on Wall Street were just plain wrong in 2016. In fact they were very wrong. The 12.5% gain that year was close to the gain of the Dow and was above the gains of the S&P and Nasdaq, and those analysts were calling for upside of a whopping 42% in 2016 and their consensus price target was closer to $148 then — versus $131.96 at the start of 2017. Apple ended 2015 at $105.26 (not adjusted for dividends now), for a total return of −3.01% in 2015 if you account for its dividend payments.

Apple has an above average weighting of right at 4% in the Dow. That makes its weighting the 10th highest in the Dow, but it is only about two-thirds as important as IBM’s 5.8% weighting. Still, Apple’s weighting is almost as much as Microsoft, Intel and Cisco combined, when it comes to its influence on the share price-weighted calculation that the Dow uses. Almost all other indexes use market caps, with many using a cap-adjusted weighting to limit the dominance of any one company.

Analysts had lowered their expected price targets and estimates for earnings and revenues during much of 2016. Being wrong and staying too bullish for too long can make that happen. Still, the trend of late has been for a rising consensus target price. While at $131.96 as of year’s end, the target was under $127 at the start of October and was $130.75 a few days before the election.

What matters now is that Apple’s major growth has come to a halt under CEO Tim Cook. Revenues of $156 billion in 2012 rose to $233 billion in 2015, but 2016 was about $215 billion and that is expected to be just $243 billion in 2018, according to Thomson Reuters estimates and historic data. Any host of new product initiatives could of course change all of that. Still, Apple’s initiatives in the era after Steve Jobs have been far less ambitious. Apple may be the world’s largest company at $620 billion or so in market cap, but it is actually in part a value stock. Apple is valued at just under 13 times an expected $9.00 or so in earnings per share expected in 2017.

Apple has yet to make any meaningful changes to its revenue model, and there are concerns that Apple’s innovation peak already may have been seen. Its revenues are more related to iPhone sales now, so the upgrade cycle from the iPhone7 to the iPhone 8 will matter handily. It is obvious that the endless upgrades from consumers likely have peaked. That is in part why many analysts have focused on Apple’s shift to being considered a services, apps and ecosystem company. After all, Mac, iPad, iPod, Apple Watch and other sales just have not eclipsed the iPhone dominance here.

While one analyst should not matter on the surface, Gene Munster has left Piper Jaffray to form a venture capital firm. Munster was one of the most renowned bullish analysts who covered Apple. His departure was followed by new coverage with an Overweight rating and with a $155 price target. That target remains more than $20 above the consensus mean target from Thomson Reuters. Another lesser known analyst issued huge iPhone sales targets for 2017 late in 2016. S&P’s year-end rating was a Strong Buy on Apple, but that was just with a $130 price target. Should a “strong buy” come with a lower target than average?

In an effort to show both sides of the coin, 24/7 Wall St. wanted to offer some of the cautious analyst calls as well. Most are bullish, with Thomson Reuters showing close to 40 Buy-type ratings versus seven “Hold” ratings and one “Sell” rating.

Wells Fargo’s Maynard Um issued a valuation range of just $105 to $120 for Apple shares on the heels of Cook talking up strong Apple Watch sales. His belief is that Apple has narrow visibility to sell-through beyond December, with potential for continued margin pressures and some risk of large M&A limiting multiple expansion. Key risks at that time included potential demand pressures from global economic uncertainties, China exposure, missteps in the product cycle, legal disputes and greater than expected margin pressures.

Apple has a 52-week trading range of $89.47 to $118.69 and a market cap of $622 billion. Its dividend yield is 1.9%.