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Can Apple Stock Reclaim $3 Trillion And Thrive In 2022?

A market cap of $3 trillion has, so far, proven to be a ceiling that Apple stock does not seem ready to break through yet. Can shares reclaim the milestone soon and head higher in the new year?

In mid-December, Apple stock  (AAPL) - Get Apple Inc. Report flirted with $3 trillion in market cap. However, the share price did not hold up above those levels for any longer than a few minutes. More recently, AAPL finally reached the milestone again, but quickly dipped below $2.9 trillion — as the broad market reacted to monetary tightening that should now happen more rapidly than previously expected.

Can shares of the Cupertino company finally find its way north in 2022 and meet the expectations of so many bulls on Wall Street? Or will bearishness take over during a year of rising interest rates and lingering inflation?

Figure 1: Apple Park in Cupertino, CA.

Figure 1: Apple Park in Cupertino, CA.

(Read more from the Apple Maven: Apple Stock: Careful With Big Tech in 2022, Says This Expert)

AAPL: the bull case

As Apple stock climbed viciously between late November and early December, many Wall Street experts piled on in support of “AAPL $3T”. Wedbush’s Dan Ives, for example, has been talking about the market cap milestone since our conversation in Q3 of last year, at least.

But other analysts have also hopped on the bullish bandwagon recently. Morgan Stanley upped its price target to $200 per share in November, while the JPMorgan research team saw Apple stock heading to $3.5 trillion in market cap over the next 12 months.

One of the most vocal optimists came from the buy side. Loup’s Gene Munster thought that his previous price target had quickly become stale, and that $250 per share now seemed more reasonable. In his opinion, the multi-year opportunity in the metaverse will gain investor appreciation in the new year, which should reignite momentum that the stock had lost in the last few weeks of 2021.

(Read more from the Apple Maven: Apple Stock: Can 2022 Be As Good As Last Year?)

AAPL: the bear case

Despite the upbeat expectations described above, mostly supported by company-specific factors, the market rolled into 2022 with its guard up. The boogieman of the moment seems to be the Federal Reserve’s anticipated reaction to near-full employment and sticky inflation, which should lead to higher interest rates in the next several months.

I have recently explained how tighter money supply can spell trouble for stocks that trade for relatively high multiples. While AAPL is no Tesla  (TSLA) - Get Tesla Inc Report or Rivian  (RIVN) - Get Rivian Automotive, Inc. Class A Report, the stock’s forward P/E of nearly 30 times and only modest earnings growth expectations could be a drag for share price in 2022, as investors look for better deals in value and cyclical stocks.

The Apple Maven’s take

I continue to think that Apple is a great stock to buy and hold for the long term. Under the leadership of a CEO (and former COO) that is driven by operational excellence, the company seems to be in very good hands. Better yet, demand for Apple’s products and services, as well as consumer appreciation for the brand, seem to be at or near an all-time high.

That said, the setup for the first few weeks or months of 2022 looks challenging to me. Apple stock climbed relentlessly in 2020, and then again last year. Aided by a spike in pandemic-driven demand for tech devices and lavish liquidity in the system, AAPL recorded one of its best three years of returns ever between 2019 and 2021.

As much as the metaverse and autonomous vehicles can and likely will support the company’s financial results over the next many years, I think that AAPL stock is overdue for a breather. While shares will likely climb back above $3 trillion and head much higher from there eventually, I am not so confident that this rally will happen in the immediate future.

(Read more from the Apple Maven: What Happens After The Santa Claus Rally?)

(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)