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If someone asked you to tell them the first thing you think of when you hear the word “apple,” your immediate response would probably say a lot about your age and what you have lived through. Maybe it would be a reference to Isaac Newton, who introduced the concept of gravity in the 1600s, and is the subject of a factually inaccurate story about an apple hitting him on the head. Or maybe it would be Apple, the record company famous for its longtime association with the Beatles.
But the world-altering company started by a pair of college dropouts, Steve Jobs and Steve Wozniak, in 1976 is likely what “apple” brings to mind first. That is, unless you’re a nutritionist. Apple (AAPL) is now a $3.4 trillion market cap company, whose product line of software and hardware have revolutionized personal communication and business productivity. It is its own ecosphere. But after decades of success, where is its stock price headed?
AAPL Stock Key Metrics
Apple has grown revenue at an 8% rate the past five years, and carries a very manageable debt to equity ratio of less than 2.0. Its dividend yield was briefly high enough for some to consider it a yield stock last decade, but at 0.4% now, that yield only provides decent cash flow to the stock’s largest holders. Apple sells for 37x trailing earnings per share, and 30x next year’s earnings, which are both lofty figures.
Apple Stock Performance Throughout 2024
Through mid-November, the Apple stock was up 17%, well behind the S&P 500’s 24% return and the Nasdaq 100’s 23% gain. The stock is more than 8% of the latter index’s total value and more than 6% of the former’s weighting. So it is clearly a prominent stock, and its price has benefited from the massive inflows to index funds that track those popular market benchmarks.
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Apple’s Business Model And Revenue Streams
Apple is still true to Jobs’ vision of “delighting and surprising” consumers, particularly in the middle to upper end of the consumer market. Cost control is a priority, as is maintaining profit margins and a dominant market share in the areas in which it competes. In recent years, it has expanded its App Store, and its brick and mortar Apple stores have brought it to the people it serves, enhancing an already iconic culture.
The iPhone is the leading source of revenue. Apple generated more than $46 billion in revenue from that segment alone during its latest quarter. However, iPads, Mac computers, watches, streaming video and the entire service component are also critical to the company’s continued growth.
The Impact Of The iPhone On AAPL Stock’s Value
However, iPhone, now in its 16 version, is a mature business, and perhaps a victim of its own success, as adding updated versions of existing products is less profitable than the next new device or technology. Upgrade cycles contribute more to the company’s bottom line than innovation. That was not always the case.
And the company has a new challenge, given its reliance on China, both for production and sales of Apple products. The iPhone is truly the centerpiece of the business, as other products are essentially designed around it. That is especially true of new applications, such as subscription bundles and augmented reality.
Growth Of Apple’s Service Segments
With $25 billion in service segment revenue in the most recent quarter, this continues to be a driver for Apple. This includes iTunes, digital content, AppleCare, Apple Pay and licensing segments. This is a central part of the company’s future growth, as it provides a second juggernaut business line that makes up for potential cyclicality that has crept into the hardware segment as the company’s products are now so widely owned.
Apple’s Expansion Into Potential New Markets
Global expansion is an ever-present project for the U.S.-based Apple. The company has helped its own growth in relatively poorer countries by offering installment plan purchases. That has helped it expand in Europe and China, and it now has its sites set on deeper penetration of emerging economies.
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Global Economic Factors That May Influence Apple In 2025
As with many market sectors, Apple is likely to be impacted by the dramatic turn of events in Washington D.C. The new administration is determined to reshore manufacturing, and become more inwardly-focused. Apple, as a prominent global manufacturer, is going to have to navigate that situation, and it is way too early to determine how that will work out. This may be where its oligopolistic nature and confirmed industry leadership provides a strong backstop.
Market Sentiment And Analyst Forecasts For 2025
Based on estimates compiled by Seeking Alpha, Apple is projected to earn $415 billion in revenue for fiscal 2025, which ends next September. That implies a price to sales ratio of 8.2, which is not cheap. Earnings are expected to grow to $7.40 a share, which is certainly strong, but also not enough to make the stock inexpensive.
As for sentiment, the best way to view that is in the chart pattern (at least, that’s my view after charting stocks for 44 years). On that measure, Apple is again a victim of its own success, but there is a potential silver lining. At around $225 a share, its price has stagnated while younger businesses like Nvidia (NVDA) have rocketed higher, the way Apple’s stock used to do. Apple’s chart is rangebound. However, its price has been trending up steadily, not dramatically, since back in August 2020, when it split its stock price 4-for-1.
Potential Challenges In 2025
In 2025 and each successive year beyond that, Apple’s biggest challenge is not staying in business or producing massive revenue. It is too entrenched in too many areas for that to happen. However, being great doesn’t always impress Wall Street, especially when your stock is so richly valued. So what Apple will need to do going forward is to justify its valuation to investors. That is harder to do as a mature business than when it was proverbially taking over the world with its cutting-edge technology and innovation, changing our lives for the better.
Where AAPL’s Price Range May Head In 2025
Over the past 18 months, Apple’s stock price has traded in a range from $165 to $235, and it currently sits near the top of that range. So a sustained breakout through that upper level will be needed for the stock to avoid disappointing investors in the coming year. And with the most recent path to its recent all time highs originating from the $190 area, that will be a key test if the stock breaks down.
Bottom Line
Apple is far from an upstart, but a cash-rich balance sheet, debt it can manage well, and a “wide moat” via its very devoted customer base all make this a stock that likely has a floor. However, it is a prominent part of the S&P 500, and that means it is always at risk of being caught up in market-wide selloffs. I judge the stock price to be vulnerable at these levels, both chart-wise and due to its hefty valuation. However, if any business can continue its run of being in Wall Street’s good graces, this is it.
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