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Can Apple Stock Climb Another 45%? What History Says

As it breaches $2.9 trillion market cap for the first time ever, Apple stock has produced 45% gains in the past year. Should investors expect similar performance over the next 12 months?

Apple stock  (AAPL) - Get Apple Inc. Report has surpassed $2.9 trillion market cap for the first time, and investors celebrate outstanding one-year returns of around 45%. Since the start of the iPhone era (i.e. 2007 to present), AAPL has produced very solid, but still lower average one-year gains of 36%.

Figure 1: Apple store in Chongqing, China.

Figure 1: Apple store in Chongqing, China.

Now, shareholders look forward. Is it reasonable to expect AAPL stock to climb another 45% until the end of 2022? Today, the Apple Maven sets aside business fundamentals for a moment and looks at what history has to say about this question.

(Read more from the Apple Maven: 2 Reasons To Own Apple Stock in 2022: iPhone, Apple Glass)

What to expect of AAPL

I have written plenty about how Wall Street experts have recently taken sides on Apple stock. On the one hand, bulls see a strong holiday quarter of sales and growth opportunities in 2022. On the other hand, a few bears think that AAPL could be overpriced by nearly 20% due to slowing growth in a post-pandemic environment and shorter lead times on iPhones.

But to understand if Apple shares could climb another 45% in the next 12 months, I turn to historical share price behavior. The gains observed in the past year may look outsized vs. the S&P 500’s historical performance. But they are fairly standard for a stock like AAPL.

The chart below shows the average gains produced by holding AAPL for 12 months, since the launch year of the first iPhone model. If the stock were bought on any given day, returns would have been 36%. If bought within 5% of peak prices, gains would have been much lower: 25%.

Notice that the outsized gains earned from holding Apple stock for a year tend to come from buying shares after a steep 20%-plus drawdown. The last one happened in September 2020, and the previous one had been during the initial COVID-19 bear market.

Figure 2: Average 1-year gains in AAPL since 2007.

Figure 2: Average 1-year gains in AAPL since 2007.

The chart above reinforces the idea that buying AAPL near peaks, as is the case today, has historically led to below average returns. Of course, these averages have still been much better than what an investor would have earned from buying and holding a diversified basket of stocks, like the S&P 500 or even the Nasdaq.

Averages only tell part of a story. Equally important, the range of outcomes has been very wide. For instance, buying AAPL near a peak in December 2007 would have resulted in massive loss of -57% over the following year. On the other hand, buying near the peak in January of the same year would have resulted in an impressive one-year gain of +128%.

Below is the distribution (histogram) of one-year returns in AAPL, when shares are bought near peaks. Again, the range of outcomes has been very wide. That said, typical gains have been roughly in the 20%-to-30% territory.

Figure 3: Distribution of 1-year returns in AAPL, near peaks.

Figure 3: Distribution of 1-year returns in AAPL, near peaks.

(Read more from the Apple Maven: Apple Stock Is On Fire: $3.2 Trillion Market Cap Is Next)

The Apple Maven’s take

Can AAPL rise another 45% in the next year? It sure can, even off its current peak levels. In fact, Apple shares have, in rare cases, more than doubled in price in 12 months even after trading near all-time highs.

However, for the sake of being conservative, I don’t think that investors should bet on something like it happening next. I think that more modest gains of 20% to 30% through December 2022, if reached, would already be considered outstanding.

(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)