Source: PaxForex Premium Analytics Portal, Fundamental Insight
While achieving a trillion-dollar valuation is usually seen as a significant milestone for most companies, for Apple, reaching a $1 trillion market cap by 2035 would not be a sign of progress; instead, it would indicate a considerable setback. Currently, Apple boasts a market cap of $2.6 trillion. Therefore, it's crucial to analyze the outlook of this iconic company and understand why a decline in its market value is not entirely improbable. Despite holding the position of the world's second-largest company, Apple is encountering challenges that cast shadows over its future. Firstly, the company's revenue growth has stagnated. Over the past two years, Apple's revenue has remained stagnant at approximately $390 billion. While this figure is impressive, especially among mega-cap companies, Apple's inability to achieve revenue growth stands out as a concerning anomaly. For instance, Nvidia, with a market cap of $2.2 trillion, is projected to achieve nearly an 80% increase in revenue this year. Secondly, Apple finds itself entangled in a complex antitrust lawsuit with the U.S. government. Although the outcome of the lawsuit remains uncertain, one thing is clear: It will embroil Apple in lengthy legal battles, consuming valuable time and resources. A relevant example of the potential impact of such legal challenges is Microsoft's "lost decade" following its 1998 antitrust lawsuit with the Department of Justice. In the decade that followed, Microsoft shares delivered a compound annual growth rate (CAGR) of just 4%, significantly lower than the 28% CAGR recorded over the subsequent 10 years. In summary, antitrust litigation typically spells trouble for investors, and for Apple, it could serve as a warning sign of a challenging decade ahead, reminiscent of Microsoft's own struggles. While a "lost decade" scenario might not lead to Apple's market cap plummeting to $1 trillion, such a significant decline would require the company's stock to shed approximately 60% of its value, reducing its market cap from $2.6 trillion to $1 trillion. Thus, the critical question arises: Is such a scenario plausible? Certainly, the stock market is unpredictable. Consider General Electric's trajectory: in 2000, it was valued at nearly $600 billion, reigning as the world's most valuable company. Fast forward to today, and its worth has dwindled to $177 billion, marking a decline of over 70%. Nonetheless, the foresight doesn't point to Apple descending to such depths. Undeniably, the company faces substantial hurdles, including the ongoing antitrust lawsuit and the diminishing novelty of its flagship product, the iPhone. Yet, Apple is not solely reliant on one product. Its services division is experiencing robust double-digit growth. While this may not suffice to counterbalance lackluster iPhone sales, it's worth noting that the company's overall revenue isn't plummeting across all segments. Moreover, Apple boasts exceptional leadership and a robust balance sheet. Since assuming the helm in 2011, Tim Cook has steered Apple's stock to a commendable compound annual growth rate (CAGR) of 23%. Financially, Apple holds $73 billion in cash reserves and has generated over $116 billion in free cash flow over the past year. In summary, while certain challenges persist, many of Apple's key performance indicators remain robust, even if revenue growth is sluggish. However, the pertinent question isn't merely whether Apple's valuation will dwindle to $1 trillion; it's whether the company can maintain its competitive edge. This is where Apple somewhat falls short. While the iPhone remains iconic and retains consumer appeal, ongoing innovation is imperative to retain market relevance. Furthermore, from an investment standpoint, there are more enticing options in the tech sector, such as Nvidia, Microsoft, and Amazon, all of which are spearheading the AI revolution and appear better positioned for growth and shareholder value creation over the next decade. Consequently, while Apple is unlikely to see its market cap plummet to $1 trillion, there are superior investment opportunities elsewhere in the market.
As long as the price is below 175.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 168.75
- Take Profit 1: 163.00
- Take Profit 2: 155.00
Alternative scenario:
If the level of 175.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 175.00
- Take Profit 1: 180.00
- Take Profit 2: 185.00