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Bulls Pile In, But Apple Stock Falls Short Of $3 Trillion

Apple stock flirted with the $3 trillion market cap, but quickly pulled back. Despite another wave of positive reviews by Wall Street experts, AAPL may have a hard time following through on the rally.

It was not for lack of bullishness and enthusiasm that Apple stock  (AAPL) - Get Apple Inc. Report dipped on Monday, December 13. Words of praise from the buy- and sell-sides, including a new Wall Street-high price target of $210 per share, met a weak broad market. AAPL ended the day down around 2%.

Today, the Apple Maven reviews the key factors that moved AAPL stock this time. We conclude with a summary of my stance on Apple shares at current levels.

Figure 1: Apple's iPhone 13, Apple Watch and AirPods Pro.

Figure 1: Apple's iPhone 13, Apple Watch and AirPods Pro.

(Read more from Apple Maven: Apple Stock: It Could Make Sense To Trim The Position)

AAPL: bull sees nearly 20% upside

Wall Street has been very fond of AAPL lately. It all started a couple of weeks ago, when Dan Ives from Wedbush stepped up and predicted a $3.2 trillion market cap within the next 12 months. His $200 price target was a dollar higher than Tigress Financial’s, disclosed in late November, and in line with Morgan Stanley’s new goal published last week.

On Monday, JPMorgan’s Samik Chatterjee topped his peers and called for $3.5 trillion in market cap. In the analyst’s view, the improvement in expectations for iPhone 13 sales will carry forward into the new year. This should be enough to grant the stock “a peak multiple on consensus earnings expectations”.

Then, famed investor Gene Munster, from Loup Ventures, went the extra mile. On that same Monday, December 13, he presented the case for AAPL at $250, suggesting fair market cap of over $4 trillion. According to him, $200 per share is already too conservative a target for next year.

Gene dug deeper into the argument. The managing partner thinks that euphoria for the metaverse and autonomous vehicles will only increase in 2022 — although the buzz has clearly started this year already. As a result, Gene sees Apple stock’s valuation climbing to a rich P/E of 35 times.

AAPL fails to breach $3 trillion

Amid so much enthusiasm in one single day, Apple stock climbed early in the trading session, and reached an intraday peak of $181.84. By my estimate of shares outstanding, this price would have been enough to push Apple’s market cap a few dollars above $3 trillion.

But from those levels, AAPL pulled back sharply by nearly 3.5% to end the session at just above $175 apiece. Clearly, the market saw reasons to “sell the news”, following Apple’s outstanding rally of the past several weeks.

Fearful or optimistic?

What I saw in the market this Monday helped to reinforce my convictions on Apple. Yes, the business fundamentals are solid. The iPhone 13 cycle looks strong, maybe more so than some believed possible a few months ago. The Cupertino company’s longer-term future also looks bright, as Apple is about to enter two promising markets with high growth potential: metaverse and electric vehicles.

But at the same time, I believe the dynamic is unfavorable for Apple in the short term — I explained the rationale in more detail recently. The stock may have rallied a bit too fast, which is evident in nearly 20 percentage points of outperformance over the Nasdaq in the past month alone.

I continue to think that AAPL is a good stock to own over the long run, and that most growth portfolios will benefit from being decently exposed to this name. However, I also think that now may be a better time to rebalance out of Apple stock a bit, not to double down in anticipation for another rally.

Is the price right?

Looking at a company’s business fundamentals is only half the work needed to find a good stock. How much one pays to own the shares is a key factor in the success of any investment. This is why valuation analysis is so important.

Alpha Spread’s user-friendly platform allows you to estimate a stock’s fair value –through valuation multiples, discounted cash flow, and more. I believe that the service is a must for anyone looking to own the right stock at the right price. Check out alphaspread.com and get started with a 7-day free trial.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)