Apple (NASDAQ:AAPL) is a polarizing company when it comes to investors. Most are betting that the tech giant will continue to grow in value despite current challenges including slowing iPhone demand and China. Some think the company is overdue for a big fall, with AAPL and Tesla (NASDAQ:TSLA) alternating as the favorite target of short sellers.
Apple stock started off 2020 at $300 and has already topped $315. That gives the company a market capitalization of $1.38 trillion. However, one analyst made headlines this week for predicting that by the end of 2021, Apple will be a $2 trillion company.
The Trillion Dollar Club
On Aug. 2, 2018, Apple became the first publicly traded American company with a $1 trillion market cap. At the time, AAPL was beginning to see iPhone sales soften. By dramatically hiking the price of the iPhone X over its predecessor, the company was still able to boost iPhone revenue.
Since then, the $1 trillion club has become a little less exclusive. Apple has been joined at different times by Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and, just days ago, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
$2 Trillion Market Cap?
When Apple hit $1 trillion, Aswath Damodaran, a professor at NYU’s Stern School of Business told CNBC, “This is a cash machine, but it’s not going to be a high-growth company: those days are behind it.”
The past year has proven that statement to be incorrect. Despite continued challenges in its key iPhone business and a trade war with China that left Apple products exposed to tariffs, Apple stock is up nearly 40% since August 2018. However, one analyst made headlines this week for the bold prediction that by the end of 2021, Apple could be a $2 trillion company.
CNBC reported that Wedbush analyst Dan Ives told investors “We believe by the end of 2021 Apple has potential to be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years.”
A Lot Would Have to Go Right For AAPL
It took AAPL decades to hit that $1 trillion market cap. For it to hit $2 trillion little over three years later would require a company firing on all cylinders.
That dream scenario would include 5G kicking off the massive iPhone upgrade cycle that failed to materialize with the release of the 10th anniversary iPhone X. Wearables like AirPods and the Apple Watch would have to continue to be hot commodities despite increasing competition. And Apple would need to convince more customers to pay for subscriptions to services like Apple TV+, Apple Arcade, and Apple Music. A new product with plenty of hype wouldn’t hurt; perhaps those long-rumored AR glasses.
There are also potential clouds on the horizon, any of which could derail AAPL growth. There is growing concern that we are overdue for a recession. That would cut consumer spending, especially on nice-to-have products like AirPods and new iPhones.
Plus, the trade war with China could escalate again. If that happened, Apple could be hit with the double whammy of losing revenue from the Chinese market and tariffs making its products more expensive to American buyers. Depending on how the 2020 election goes, Apple could be facing a President with a “break up big tech” agenda.
Bottom Line for Apple Stock
What does the future hold for Apple? More importantly from an investment perspective, who will be right about AAPL: the NYU professor who feels Apple’s high-growth days are over, the short traders who see Apple stock dropping in value, or the Wedbush analyst who thinks Apple could make the leap to $2 trillion valuation less than two years from now?
Obviously, we’ll have to wait and see. However, assuming we avoid a recession, the trade war with China doesn’t flare up again, and the company avoids the big tech break-up scenario, there doesn’t appear to be anything standing in Apple’s way.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.