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With a year-to-date return of almost 32%, Apple (AAPL) stock is outperforming the S&P 500 Index ($SPX). However, it is the second-worst performing “Magnificent 7” stock, ahead of only Microsoft (MSFT), which is up about 14.5% in 2024.
But while Apple’s 2024 price action might not sound extraordinary, it came amid quite tepid expectations. Three brokerages downgraded AAPL stock in the first two weeks of January alone, which was quite a rarity for the company.
Apple Outperformed the S&P 500 Index in 2024
While Apple was the largest publicly traded company at the beginning of the year, Microsoft edged past the iPhone maker by mid-January. By March, Microsoft had extended its lead over Apple by $400 billion. However, in June, Nvidia (NVDA) outflanked both Microsoft and Apple to become the world’s largest company.
Apple eventually reclaimed its title, defied naysayers, and delivered respectable returns this year. In this article, we’ll examine Apple’s 2025 forecast and analyze whether the Cupertino-based company will become a $5 trillion giant.
Dan Ives Expects Apple’s Market Cap to Rise to $5 Trillion
Dan Ives of Wedbush Securities, who has a Street-high target price of $325 on AAPL, believes that Apple’s market cap will rise to $5 trillion over the next 12-18 months. He is particularly bullish on the sales outlook for Apple gadgets ranging from iPhones, Macs, and iPads amid the artificial intelligence (AI)-driven upgrade cycle.
The average sell-side analyst does not share his optimism, though. Apple’s mean target price of $242.36 is 5.2% below Dec. 27 closing prices. Of the 35 analysts covering Apple stock, 18 rate it as a “Strong Buy” and 4 as a “Moderate Buy.” 11 analysts rate Apple as a “Hold” while the remaining 2 rate it as a “Strong Sell.” Apple is the second-worst-rated Magnificent 7 stock after Tesla (TSLA), which has always been a polarizing company.
Apple Stock Price Prediction 2025
Brokerages’ pessimism toward Apple is not hard to comprehend. The sales of the iPhone 16, which is powered by “Apple Intelligence,” haven’t taken off to the scale that bulls expected. The relentless selling of Apple shares by Berkshire Hathaway (BRK.B) chair Warren Buffett is not doing much good for Apple, even though the Oracle of Omaha’s selling spree goes far beyond Apple.
President-elect Donald Trump’s return to the White House is also a risk for Apple as he has vowed to impose tariffs on imports from China, which is a major sourcing destination for Apple. Given the uncertain macroeconomic environment, Apple might find it tough to pass on the higher costs to buyers. It would be worthwhile to remember that AAPL stock fell over 30% in Q4 2018 and lost its trillion-dollar market cap amid the escalating U.S.-China trade war during Trump’s first term.
Apple is witnessing intense competition in China where consumers are increasingly pivoting to homegrown brands. We have seen the same trend play out in the Chinese automotive markets, where many consumers are now opting for domestic brands over Western automakers. General Motors (GM) “restructured” its China operations earlier this month taking a hit of over $5 billion in the process. The rising hostility between the world’s two largest economies is not helping the case of U.S. companies doing business in China, and the trend is not expected to reverse anytime soon. More recently, Huawei has lowered the prices of its high-end smartphones in China which might prompt a price war in the country - something which has been on full display in its electric vehicle market.
Should You Buy Apple Stock?
Apple trades at 34.5x its expected earnings over the next 12 months and the multiples are close to the highs that we have seen over the last three years. To be sure, Apple has seen a rerating as it has positioned itself as a software and services. Also, the next big step in the AI pivot will be adoption of the new technology through consumer devices like phones and PCs. While the initial response has been somewhat tepid, things should scale up as Apple adds more AI features to its devices.
However, at current multiples, I would be a bit wary of buying more AAPL shares, especially given the various headwinds that the company faces. While I remain optimistic about the AI-fueled iPhone replacement cycle, it remains to be seen whether Apple can generate significantly higher margins on these devices. As for Apple becoming a $5 trillion company over the next year, a lot would depend on how the sales of its AI-powered devices shape up.
