2018 Bull/Bear Outlook for Apple: Is $1 Trillion Even Enough?

It is no secret that stocks are in the middle of one of the greatest bull markets of our lives. The Dow Jones Industrial Average (DJIA) and S&P 500 have risen more than 300% from their March 2009 panic-selling lows, and the gains in 2017 were up over 25% on the Dow and up almost 19.5% on the S&P 500. Now we have seen Wall Street strategists call for even more upside in 2018 on the heels of tax reform and accelerated growth of earnings and gross domestic product.

If there is one stock that captures the love and interest of the investment community as the poster child of the bull market, Apple Inc. (NASDAQ: AAPL) would be the first name that comes to mind. This is by far the largest company by market cap, at $881 billion at the end of 2017. Some analysts are predicting that Apple will be the first public company ever to reach a market value of $1 trillion.

24/7 Wall St. has issued its annualized forecasting tool showing that DJIA at 26,400 and at least 2,855 on the S&P 500 seem to be the baseline targets for 2018. For this to occur, Apple almost certainly will have to play a role in the bull market’s nine-year run. In a bull-bear analysis of Apple, perhaps the real question is whether $1 trillion in future valuation is even enough?

As 2018 kicked off, the Dow hit 25,000 for the first time. The S&P 500 has blown through 2,700 like butter. The S&P 500’s total index market cap is $24.5 trillion, while the Dow’s total index market cap is almost $7 trillion.

Apple had a 2017 year-end price of $169.23, to generate its $881 billion market cap. That price gave it a weighting in the Dow of 4.78%, but despite its highest market cap the Dow’s price-weighted calculation made Apple only the sixth largest component by weight. The S&P 500 is a more realistic calculation due to a market cap-weighting methodology, and Apple was by far the largest weighting in that index. Apple also dominates the Nasdaq 100 for the highest weighting versus the entire index market capitalization of almost $8 trillion.

Apple was expected to generate a return of almost 16% in 2017. It almost tripled that gain with a total return of 46% for the year. And Apple’s year-end closing price came with a consensus analyst target price of $187.58 and a 1.49% yield, for a projected total return of over 12.3% in 2018, if the expectations come true.

So, what has to happen for Apple to become a $1 trillion company? Apple has continually outpaced the pack of analysts on expectations. If it manages to rise just the 12.33% expected in 2018, then the implied market cap would be right under $990 billion.

Apple’s year-end closing price of $169.23 and its consensus analyst price target of $187.58 sound impressive enough, but Apple shares already hit $177.20 back on December 18. After a year-end wave of small profit taking, Apple’s closing price after three days of trading in 2018 of $173.03 was up 2.25%.