Technology

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

Apple is viewed at the start of 2018 with at least some concern. Maybe that concern is misplaced as this stock has climbed the biggest wall of worry in history. The S&P 500 is now valued at close to 19 times expected 2018 earnings per share, but the mighty Apple is somehow valued at less than 15 times expected fiscal September 2018 earnings. Apple is also expected to grow earnings each year through at least 2020, and its dividend is expected to follow with more hikes as well.

The company had $229 billion in 2017 sales, and it has amassed more than $260 billion in cash.

Apple could also be a beneficiary under tax reform taking the corporate rate down to 21% from a nominal 35% for the United States. Apple is already a very international company, but its effective tax rate is closer to 25%. And Apple has well over $100 trillion that it can repatriate from overseas.

That repatriated cash poses a risk in the $1 trillion market cap chase. Apple has 5.13 billion shares outstanding, but Apple has been a massive acquirer of its own shares. That means Apple actually could shrink its float of shares further, and that might prevent the $1 trillion face value from becoming reality.

Another potential drag could be that Apple also said its devices were at risk due to security concerns embedded within its ARM-based and Intel CPUs. And there has been some concern that the Apple iPhone X has been disappointing to mixed since its launch. Instinet and others have voiced concern, but Piper Jaffray and others have been positive for a supercycle in Apple.

The consensus analyst target price of $187.58 has been trumped by many analysts on Wall Street. RBC has a $190 target, Wells Fargo has a $195 target, HSBC has a $193 target and Morgan Stanley had a $194 target.

Apple has been slow to move off of its reliance on iPhone sales. Still, the company has music and content sales, and its Apple Watch is expanding into a health monitoring device. It has launched smart speakers, and Apple has a role of some sort in the coming trends of connected and autonomous vehicles. And Apple’s Mac computer sales have been rekindled.

So, is $1 trillion enough for Apple’s future market value? We shall see, but we may get to find out in 2018 or in early 2019. Apple has a 52-week range of $115.75 to $177.20.

And for those who worry that 2018 could be a bumpier stock market ride than 2017, investors can consider lower volatility strategies in case a big correction looks more likely. The lower volatility might not apply to Apple with such big gains, but it’s hard to find any technology stock fund that does not own Apple.