Apple was the first public company in history to reach a $700 billion, $800 billion, $900 billion, and $1 trillion valuation. Could it also be the first company to hit the vaunted $2 trillion mark? And, if so, when will this happen?
In a research note to clients, Evercore ISI analyst Amit Daryanani argues that not only can Apple get to this mark, it can do so over the next four years. That would be just six years after it hit $1 trillion for the first time. Today, Apple is worth around $1.3 trillion.
Daryanani argues that there are four things that will help Apple hit this mega market cap. Some of them, like higher profits, are pretty self-explanatory. Daryanani also says that Apple should continue aggressively buying back its stock. If it was able to reduce its share count by 1 billion by fiscal 2024, Apple would hit $2 trillion if stock topped $550. AAPL is currently trading at $321.85.
The most interesting part of Daryanani’s analysis is the importance of services and wearables as Apple continues to climb. As Barron’s writes of Daryanani’s analysis:
“He has high hopes for Apple’s services and wearables arms, anticipating sustained double-digit growth for both, driven by higher average revenue per user and a better monetization of the installed base of device users. He sees revenues from the wearables business, which includes AirPods and the Apple Watch, headed to more than $60 billion over the next few years. And he thinks revenue from the services business can reach $100 billion.”
The services push will also help increase Apple’s gross margins. Gross margins in its services business is currently in the mid-60% range. This is much higher than the high-30% range for Apple as a whole. Since services are currently growing faster than Apple’s hardware, gross margins should expand.
Do you think Apple will hit the $2 trillion mark by 2024? And, if so, will it be the first tech giant to hit this target? Let us know your thoughts in the comments below.