Apple Inc.’s rally in 2023 has brought it back to the brink of a historic threshold: a $3 trillion market valuation.
The stock has soared 35% this year, adding nearly $690 billion in market value, as investors have flocked to the iPhone maker’s steady revenue and massive cash flows. The advance has put Apple within striking distance of its January 2022 record.
Apple and other technology behemoths have been market standouts this year as investors have gravitated to companies with the biggest scale while staring down risks from a potential recession, bank failures and now a US debt-ceiling standoff. It’s a favorite stock for institutional investors, hedge funds, retail investors, and Warren Buffett.
The stellar performance has, however, led to an increased debate around Apple’s valuation. At 28 times projected earnings, the stock is in rarefied air for a technology firm whose revenue is expected to shrink this year, trading at a premium to its own history, as well as the market, according to data compiled by Bloomberg.
While Apple briefly rose above $3 trillion in early 2022, it failed to close above that level, and the peak marked the start of a downtrend that resulted in a 27% drop that year as investors fled tech stocks amid soaring interest rates. Should Apple achieve the milestone, it would be the first to do so. Currently, at $2.76 trillion, it is bigger than the entire Russell 2000 index.
Apple’s results this month underlined the bull case. Both earnings and revenue were better than expected, thanks to a rebound in the iPhone and growth in its Services business. The company also raised its dividend and announced plans for $90 billion in stock repurchases.
That commitment to shareholder returns, coupled with the firm’s durable revenue streams, made Apple and other megacap tech stocks a favorite safety play earlier this year, when the collapse of Silicon Valley Bank led to turmoil in the banking sector. But now, amid expectations the Federal Reserve will start cutting interest rates as soon as July to stoke economic growth, investors are looking to it for its offensive, rather than defensive, characteristics.
“Apple is just as likely to perform well in a risk-on environment as a risk-off one,” said Sylvia Jablonski, chief executive officer of Defiance ETFs. “You can’t expect 20-30% returns from here, but I’d rather park my money here than in a Treasury. There is a lot of opportunity for growth even in a tough market, and it pays a dividend, buys back a ton of stock, and has this incredibly strong balance sheet, all of which is attractive to investors.”
