How High Will Apple Stock Go?

How High Will Apple Stock Go? Apple has been in the news quite a bit lately, and not for the usual reasons. In this case, the company made a bold decision that put it at odds with another tech giant – Facebook (FB). The controversy can be summed up this way: 

During the week of April 25, 2021, Apple released an update to its iOS software – the platform that powers iPhones, iPads, and just about everything else that carries the Apple logo. The updated software offers users a new privacy option called App Tracking Transparency. This feature makes it possible for anyone with an Apple device to grant – or deny – apps the ability to track their web-based activity. 

The fact that user activity is tracked isn’t news. That’s been going on for years. However, an easy option for consumers to turn off that tracking marks a dramatic change in strategy.

Apple argues that App Tracking Transparency is the right thing to do for its customers. On the other hand, Facebook is furious because the type of data collected from tracking activity drives its ability to generate advertising revenue. 

Consumers appear to be enthusiastic about the new feature, and that translates into increased sales. When coupled with all of the other advantages Apple brings to the table, it’s no wonder investors are putting Apple stock at the top of their buy lists. The question is, how high will Apple stock go? 

Apple Revenues Soar Above Estimates

Apple’s most recent earnings report exceeded investors’ wildest expectations. For the quarter ending March 27, 2021, revenues increased by 62 percent year-over-year – and it wasn’t a single product that drove the impressive rise.

Consumer demand for iPads, iPhones, and Mac computers surged. In fact, management noted that the past three quarters delivered Mac computers’ best sales of all time. 

Computers and mobile devices aren’t the only contributors to Apple’s revenue. The company is generating robust service revenues that are growing quarter-over-quarter and year-over-year. Examples include the App Store, Apple Arcade, Apple News+, Apple Music, Apple Fitness+, and Apple TV+. 

Apple is continuing to expand the service offerings through added Apple Arcade games and improved workouts on Apple Fitness+. Consumers are responding by expanding their relationship with the business and the amount of time immersed in the Apple world. 

The most recent quarter broke the company’s previous service revenue records. Growth came in at 27 percent year-over-year. All signs point to continued revenue growth in this division of the business, which is projected to add quite a bit to bottom-line results.

Service Revenues Set To Boost Earnings

Some of the new Mac-related revenue is attributed to a higher-performing chip. Known as the M1 chip, this custom piece of hardware offers two times the power efficiency and 3.5 times the CPU performance as compared to the Intel chip it replaced. Better still, the M1 chip costs less, which means Apple will realize greater profits per unit sold. 

Some of these profits have already started rolling in, as demonstrated by a 36.1 percent increase in gross margin for the most recent quarter. Most analysts and industry experts expect continued improvements in profitability because Apple is adding the M1 chip to iPad Pros and iMacs effective Spring 2021. 

The service side of the business has a more impressive gross margin. In the most recent quarter, that figure came to approximately 70 percent. As service revenues expand, they are expected to make an important contribution to the company’s total earnings. 

Is Apple Stock Undervalued?

In January 2021, Apple stock peaked at approximately $145 per share. It has since drifted downward, and many analysts believe this is the best opportunity investors will have to buy before AAPL share price resumes an upward trajectory. 

Between the potential associated with M1 chips and Apple’s expanded service offerings, there is no sign that the company will hit a plateau. In the next 12 months alone, a number of analysts suggest that the stock could increase by a full 45 percent. 

The consensus forecast for Apple share price is closer to $157, which still represents significant upside from current levels.

In short, at today’s prices, a majority of market experts are convinced that Apple stock is undervalued. That’s good news for anyone who hasn’t quite had a chance to add this tech stock to their portfolio. 

Semiconductor Shortage Threatens AAPL Share Price

One concern plaguing every major player in the computer and mobile device industry is the looming shortage of semiconductors. It’s a global issue, prompted by increased demand due to the pandemic. The complicated trade relationship between the United States and China has only added to the crisis. 

If Apple cannot find a workaround for the semiconductor shortage, its ability to grow revenues will be stymied. By some estimates, the supply of semiconductors won’t match demand until at least the end of 2022. That’s a long time for Apple to find itself unable to produce must-have computers and mobile devices. 

The good news for Apple’s investors and fans is that the company has created one of the most reliable, efficient supply chains in the world. If Apple can use that infrastructure to its advantage, it may succeed in overcoming the semiconductor shortage. Better still, it could gain a competitive edge if it is able to continue producing in-demand devices while competitors like Samsung fall short. 

Is Apple Stock Price Forecast To Rise?

Overall, a majority of analysts agree that Apple stock is forecast to rise. Over the next 12 months, the median Apple stock forecast is $157 per share, but some are projecting a figure closer to $185 per share. 

A strong majority have rated Apple stock a buy – and it’s worth noting that the Oracle of Omaha himself, Warren Buffett, has publicly admitted that he made a big mistake when he sold some of Berkshire Hathaway’s Apple shares. He, too, is convinced that Apple stock will rise over the long-term. 

How High Will Apple Stock Go?

It’s hard to predict with any level of certainty how high Apple stock will ultimately go. Share prices are heavily dependent on outside factors that the company cannot control. For example, disruption in global trade could be problematic, and larger economic challenges could impact demand for Apple products and services. 

However, generally speaking, Apple products enjoy strong branding and a deeply loyal customer base. In addition, consumers have shown their appreciation for Apple’s decision to offer more control over privacy, which has enhanced the company’s reputation on an international scale. 

The best stake in the ground is a discounted cash flow forecast analysis which pegs Apple’s fair value or intrinsic value at a price of $157 per share.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.