Is Apple Stock A Buy After Reaching A $3 Trillion Market Cap?

Apple (AAPL) on Monday became the first company to reach a market capitalization of $3 trillion. But with Apple stock in record high territory, many investors are wondering if AAPL stock is a buy right now.


Apple Stock Notches Record High

In intraday trading on Jan. 3, Apple briefly hit a market value of $3 trillion when its shares reached 182.86. AAPL stock climbed as high as 182.88 before retreating. It ended the day up 2.5% to 182.01.

The milestone is mostly symbolic but it shows that investors are bullish on prospects for Apple stock.

In August 2020, Apple became the first company to reach a market cap of $2 trillion. Microsoft (MSFT) hit the $2 trillion milestone in June 2021. And Google parent Alphabet (GOOGL) followed in November.

Apple cleared a market value of $1 trillion back in August 2018.

Apple’s Storied History

Apple has been an American success story several times over. First, it ignited the personal computer revolution in the 1970s with the Apple II. Then it reinvented the PC in the 1980s with the Macintosh.

Co-founder Steve Jobs returned to run Apple in 1997 and oversaw a winning streak of innovations that included the iMac, iPod, iTunes, iPhone, iPad and the App Store.

The biggest driver of Apple’s modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.

But iPhone sales have slowed as users hold on to their handsets for longer periods between upgrades. However, the company is in the midst of a major upgrade cycle with its 5G iPhones.

Apple Stock News: New MacBooks, AirPods

On Oct. 18, Apple held its second product launch event of the fall. It introduced new MacBook Pro notebook computers, third-generation AirPods wireless earbuds and a lower-priced tier for its Apple Music service. Apple stock rose 1.2% on the news.

A month earlier, on Sept. 14, the Cupertino, Calif.-based company announced its second-generation 5G-enabled smartphones, the iPhone 13 series. The new handsets are incremental upgrades to last year’s iPhone 12 series. The iPhone 13 devices feature brighter displays, faster processors, improved cameras, and longer battery life.

Like the previous models, the new handsets have display sizes of 5.4, 6.1 and 6.7 inches and starting prices ranging from $699 to $1,099.

At the September event, Apple also announced the Apple Watch Series 7 smartwatches and new iPad tablets. However, investors were unimpressed with the news. Apple stock fell 1% after the event.

The iPhone 13 series went on sale on Sept. 24 and the initial response has been positive.

Apple Opportunities For Growth

With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.

Lately, two businesses have given Apple’s sales and profits a boost: services and wearables.

In the September quarter, Apple’s services revenue rose 26% year over year to $18.3 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.

Meanwhile, Apple is facing antitrust scrutiny in the U.S. and Europe for its App Store policies, including its 30% commission fee. In November 2020, Apple cut its commission rate to 15% for small developers, possibly to appease regulators. But Apple stock trended down in the days after that news.

On April 30, the antitrust commission of the European Union issued preliminary charges against Apple in a case initiated by a complaint from Spotify Technology (SPOT). The European Commission accused Apple of abusing its dominant position in the distribution of apps through its App Store. Apple stock fell 1.5% on the news.

In late August and early September, Apple announced changes to its App Store policies in response to legal challenges in the U.S. and Japan.

On Sept. 10, a U.S. District Court judge ruled that Apple’s anti-steering policies are anti-competitive. The judge issued an injunction barring Apple from prohibiting developers from including in their apps external links or other means of directing customers to alternative payment methods outside of the App Store. Apple has appealed the ruling. The initial court ruling drove Apple stock down 3.3%.

Apple Car Rumors On The Rise

Apple’s Wearables, Home and Accessories unit saw sales increase 12% to $8.8 billion in the September quarter. This unit includes wearables like the Apple Watch, AirPods wireless earbuds and Beats headphones. It also contains the Apple HomePod Mini wireless speaker and other miscellaneous gadgets.

Meanwhile, speculation has risen that Apple is looking to make a self-driving electric car. Those rumors picked up steam in January 2020 when Hyundai reported early discussions with Apple about a car partnership. Apple also has held talks with Nissan and other automakers, according to news reports.

In June 2021, Bloomberg reported that Apple hired Ulrich Kranz, a former BMW executive and the recently departed chief executive and co-founder of electric-vehicle startup Canoo, to work on its Apple car venture. Also, Kevin Lynch, Apple vice president of technology, reportedly transferred to the Apple car project from the Apple Watch unit in July.

However, in a setback, Ford Motor (F) hired away the head of the Apple car project, Doug Field, in early September, Bloomberg reported.

But the Apple car rumors haven’t done much to lift Apple stock.

Apple Earnings: Sales Miss Views

Late Oct. 28, Apple missed Wall Street’s target for sales in its fiscal fourth quarter but matched views on earnings. Apple stock fell 1.8% the day after the earnings release.

Apple earned $1.24 a share on sales of $83.4 billion in the quarter ended Sept. 25. Analysts expected earnings of $1.24 a share on sales of $85.1 billion, according to FactSet. On a year-over-year basis, Apple earnings rose 70% while sales climbed 29%.

In the September quarter, iPhone revenue jumped 47% year over year to $38.9 billion. Apple’s iPhone business accounted for 46.6% of total revenue in the period.

Apple’s iPad tablet sales rose 21% to $8.3 billion. But Mac computer sales increased less than 2% to $9.2 billion.

Component shortages and factory shutdowns from the Covid pandemic cost Apple $6 billion in potential sales in the September quarter, Chief Executive Tim Cook said. And the impact could be greater in the December quarter, he warned.

The next possible catalyst for Apple stock could be the company’s December-quarter report, due out in late January.

Exclusive Apple Stock Ratings

Apple stock is trading in record high territory.

AAPL stock has an IBD Relative Strength Rating of 93 out of 99. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.

Apple stock has an IBD Composite Rating of 97 out of 99, according to the IBD Stock Checkup tool. IBD’s Composite Rating combines five separate proprietary ratings of fundamental and technical performance into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

AAPL Stock Technical Analysis

On June 30, Apple stock hit a buy point of 137.17 out of a cup base, according to a daily chart on IBD MarketSmith.

On July 9, AAPL stock reached an additional buy point of 145.19. That’s when it broke out of a 23-week consolidation period, based on a weekly MarketSmith chart.

On Nov. 17, Apple stock broke out of a cup-with-handle base at a buy point of 153.26, MarketSmith charts show.

Is Apple Stock A Buy Right Now?

Apple stock is not a buy right now. It is currently extended beyond the 5% buy zone of its recent breakout.

AAPL stock needs to form a new base in the right market conditions before setting its next potential buy point. Check out IBD’s Big Picture column for the current market direction.

Keep an eye on the overall stock market. If the market turns south, don’t try to fight the general stock market direction.

To find the best stocks to buy and watch, check out IBD’s Stock Lists page. More stock ideas can be found on IBD’s Leaderboard, MarketSmith and SwingTrader platforms.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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