Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Is Apple Heading To $200?

ph.investing.com/analysis/is-apple-heading-to-200-125218
Is Apple Heading To $200?
By Haris Anwar/Investing.com   |  Aug 18, 2022 01:38
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
US500
-2.11%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
INTC
-2.76%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
QCOM
-3.44%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AAPL
-4.91%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NVDA
-4.05%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MU
-1.94%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Apple is less than 5% shy of its all-time high after the past two-month rally
  • The world’s most valuable company significantly influences the S&P 500 Index due to its $2.8 trillion market capitalization
  • The biggest question lurking in investors’ minds is whether this rally is sustainable against a recessionary backdrop

Shares of Apple Inc (NASDAQ:AAPL) have been showing incredible momentum over the last couple of months. Despite this year’s bear market, the world’s most valuable company is currently hovering near all-time highs after surging 35% from its June low.

AAPL Weekly Chart
AAPL Weekly Chart

The biggest question for investors now is whether this rally is sustainable amid current broad market conditions. The iPhone maker significantly influences the S&P 500 index due to its $2.8 trillion market capitalization, making this rally essential for the market to continue its upward journey.

A Toxic Combination

Many risks can still derail Apple’s uptrend in the short run. The economy is still struggling amid inflation close to the highest in four decades and rising interest rates, a toxic combination that could hurt demand for Apple’s products and services.

In its most recent earnings release, Apple’s revenue and profit narrowly topped analysts’ estimates, with iPhone sales holding up better than expected.

Earlier this year, the Cupertino, California-based company had warned that the third quarter could be rough, with supply chain snags cutting sales by $4 billion to $8 billion.

However, as earnings displayed, the damage was significantly lower, building expectations that the company’s hardware products are still in great demand.

On the other hand, Apple’s suppliers have begun to show signs that the demand slowdown might be spreading. Micron Technology (NASDAQ:MU) warned last week that sales in the current quarter should be weaker than its earlier forecast less than six weeks ago. That followed disappointing revenue projections from Qualcomm Incorporated (NASDAQ:QCOM), Intel Corporation (NASDAQ:INTC), and NVIDIA Corporation (NASDAQ:NVDA).

Furthermore, China’s strict COVID policies could still be a hurdle in Apple’s growth plans if a new wave of the virus arrives in the coming winter, choking Apple’s supply lines.

Beyond these risks, Apple stock looks expensive after this rally. It’s now priced at 27 times profits projected over the next 12 months, compared with an average of 17 over the past decade. That valuation will be hard to justify if the market enters another rough patch in the near term.

For these potential headwinds, according to several financial models like those that value companies based on P/E or P/S multiples or terminal values, the average fair value for Apple on InvestingPro stands at around $154, implying an 11.3% downside potential.

AAPL Fair Value
AAPL Fair Value

Source: InvestingPro

Apple stock remains a solid pick for long-term investors who should add this name to their portfolio when the next dip arrives. In a recent note to clients, Morgan Stanley made a compelling case to own Apple stock, predicting the stock could soon hit the $200 mark with a market capitalization of $3 trillion.

According to the investment bank, the market still values the iPhone maker as a hardware company when it should use a “lifetime value” based approach. This lifetime value model assumes that Apple users will spend $2 per day on Apple products or services, a figure already achieved by US iPhone owners.

Another strength that makes Apple a great bet over the long run is its safe-haven status and ability to return massive amounts of cash during a potential recession. With about $200 billion in cash, Apple is in an enviable position to quickly increase its share repurchase program whenever needed, thus supporting its stock amid difficult times.

Bottom Line

Apple’s big upside move during the past two months has made its stock expensive, given the macroeconomic headwinds and demand uncertainty. That being said, Apple remains a great candidate for long-term investors who want to own a big-cap defensive stock to ride through a potential recession. The next dip could be the right time to make that move.

Disclosure: The writer owns Apple shares.

Is Apple Heading To $200?
 

Related Articles

Is Apple Heading To $200?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email