Is Apple’s Stock Likely to Reach $1000 in the Next Year? A Comprehensive Analysis
Recently, a question about whether Apple’s stock would reach $1000 has gained traction, reigniting discussions among investors. Over 9 years ago, the stock was trading around $500-600, raising the question of if it would double by mid-2014. While it did take until 2017 to double, a 100% gain in five years is indeed more favorable than typical savings accounts.
However, currently, Apple’s stock price is around $700, showing a 41% increase since that time. It’s crucial to focus on market cap rather than specific stock prices, as market cap reflects the overall valuation of the company. For instance, it took Apple 42 years to reach a market cap of $1T, but only 2 more years to get to $2.15T.
Current Market and Sales Trends
The growth in Apple’s market cap is noteworthy, with sales growth in the last three years showing a mere 5%. This pattern is compounded by increasing product prices and a decline in product sales. To counter declining sales, Apple has been raising the asking prices of its products, which is a strategy that may not bode well for its future.
Understanding the Market Cap and Price-to-Sales Ratio
The price-to-sales ratio of Apple is a crucial metric. Despite its impressive market cap, Apple could still be overvalued. The high price-to-sales ratio indicates that the company’s stock price is higher relative to its sales, suggesting that investors might have overestimated future sales growth.
Why is Apple’s Stock Attractional?
Several factors contribute to the allure of Apple’s stock:
A considerable number of buyers who purchase Apple stocks without fully understanding the rationale behind their purchases. These individuals often see their peers using Apple products and follow the trend.
Investors who believe that the impact of 5G is not reflected in the stock price, despite 5G being a significant technological advancement that should impact the market cap.
Financial managers who feel compelled to invest in large-cap tech stocks, as they are the primary sources of alpha generation.
Despite these factors, Apple could have ventured into new markets and products, such as:
Creating its own social platform to compete with Instagram.
Integrating e-commerce solutions to compete with Shopify.
Enhancing its cloud-oriented services and selling infrastructure like Azure/AWS.
Unfortunately, Apple has not taken these steps, instead focusing on repackaging existing products.
Investment Considerations and Future Outlook
While there is no clear stance on whether Apple’s stock will reach $1000, the current market cap of $2.15T is not justified based on the company's current performance. The risk-to-reward ratio for investments in Apple is currently too high.
Investors looking for unique, deep-value investment opportunities targeting returns of 5-1 should consider other investment options. For more detailed insights and asymmetric bets, I highly recommend reading Chris MacIntosh’s weekly newsletter. Chris, having retired in his late-20s, made significant returns in areas like New Zealand real estate, the last commodities bull market, Bitcoin, and shipping, and now shares his strategies with retail investors through his deep value hedge fund.
In conclusion, while Apple continues to be a significant player in the tech industry, its current market cap may not be fully warranted by its recent performance. Investors should carefully consider all available options and trends before making investment decisions.