Apple Inc (NASDAQ:AAPL) is one of the largest tech firms in the United States. APPL stock has rebounded strongly over the last 12 months, now up 51%. The company boasts a market cap of over $2 Trillion and a steady 5 Year Beta of 1.20.
In the most recent Q3 earnings, Apple turned over $81.4 billion in revenue, a YOY improvement of 54%. Investors are also excited about the new iMac and iPad Pro models alongside the launch of the iPhone 13.
However, this year the company has announced larger initiatives such as their clean energy program and a $430 Billion investment in US innovation and job creation. With an exciting outlook ahead, this article will breakdown the Apple stock forecast over the next 5 years.
Table of contents
- Are analysts bullish on Apple’s stock forecast?
- JP Morgan analyst expects 246 Million iPhone sales in 2022
- What are the revenue forecasts for Apple?
- The main revenue drivers for this growth
- What are the risks facing Apple stock over the next 5 years?
- The Bottom Line – Apple stock forecast 2025
Are analysts bullish on Apple’s stock forecast?
Across the board of 43 Wallstreet analysts the general consensus is overwhelmingly bullish. The average price target amongst analysts is currently $164.78 according to WSJ data. Following the Q3 earnings results of FY21, we saw a trend of upgrades from analysts suggesting a shift in “smart money” consensus.
JP Morgan analyst expects 246 Million iPhone sales in 2022
JPMorgan analyst Samik Chatterjee raised the firm’s price target to $180 a share. The analyst noted Apple is set up for multiple catalysts in 2021 including the upcoming iPhone 13 launch. Chatterjee also noted there is lower expectations for iPhone revenue for fiscal 2022 which may benefit Apple if they can outperform expectations.
Chatterjee expects iPhone sales to reach 246 million units in 2022 with “substantial upside” relative to consensus expectations. The analyst maintains an overweight rating on the stock.
Apple’s advertising business could grow to $10 Billion by 2024
Bernstein analyst Toni Sacconaghi noted that Apple has a flourishing advertising business, with an estimated $3 Billion in annual revenues. The analyst estimates that the advertising business could grow to be $7 Billion -$10 Billion or more by 2024.
The key drivers of this growth include the introduction of search ads to China in June of this year, higher ad loads, and the introduction of banner ads in May of this year according to theFly.
Wedbush sees Apple reacingh $3 Trillion market cap next year
Wedbush analyst Daniel Ives noted Apple’s recent earnings featured a record top and bottom line beat with a focus on the undergoing iPhone and 5G supercycle. Ives characterized the earnings beat as a “gold medal” performance by Apple during a quarter featuring chip shortage setbacks.
The analyst also noted that this quarter is a “great next step” in driving this stock to a $3 trillion market cap over the next year according to theFly. The analysts target represents a 25% upside.
What this means for Apple investors?
It is clear the current consensus amongst analysts is bullish, with the average price target suggesting a neat upside from the current trading price. Majority of analysts have boosted their price targets this month as a result of the record breaking past two quarters. This is a positive signal for investors which suggests analysts can see greater upside than in previous valuations.
What are the revenue forecasts for Apple?
Firstly, revenue forecasts from analysts can provide investors a greater insight into the financial outlook of the company. Analysts expect revenue to groe in the next two quarters with average estimates at $84.58 Billion (September) and $119.98 Billion (December) respectively.
Looking ahead the remainder of the year, analysts expect the company to generate $36 6 Billion in 2021. This forecasts would represent a 33% YOY growth in revenue which is an impressive achievement for such a large scale corporation. Analysts expect revenue to be similar in 2022, with average forecasts estimating Apple to generate $379.48 Billion.
If we look ahead over the next 5 years, Loup Ventures Managing Partner – Gene Munster forecasts Apple to maintain an 8% revenue growth through 2022/23 with Mac and iPad sales growing at a faster rate than iPhone sales.
This is due to the work and learn-from-anywhere mega-trend. By 2025, the analyst expects revenue to grow at 6% annually. The analyst did however caution any legal changes resulting from current App Store lawsuits will impact the Apple stock forecast for 2025.
The main revenue drivers for this growth
When looking deeper into the revenue drivers of the business, it is worth noting Apple’s Q3 revenue was heavily influenced by international sales. According to Apple, 18% of sales were generated from Greater China and 23.26% of sales generated in Europe.
Apple also saw “double digit” growth within each product category suggesting their products are continuing to gain momentum with customers across the globe. The companies strongest product category is the iPhone, which drove $39.57 Billion in sales in Q3 (YOY growth of 49%).
“Our record June quarter operating performance included new revenue records in each of our geographic segments, double-digit growth in each of our product categories, and a new all-time high for our installed base of active devices… We generated $21 billion of operating cash flow, returned nearly $29 billion to our shareholders during the quarter, and continued to make significant investments across our business to support our long-term growth plans.” said Luca Maestri, Apple’s CFO
App spending to reach $270 Billion by 2025
According to SensorTower, Global consumer spending on premium apps, in-app purchases, and subscriptions across Apple’s App Store and Google Play will reach $270 Billion by 2025. This forecasted growth represents a 2.5x increase from the spending recorded in 2020. Apple makes up $185 Billion of this 2025 spending forecast, suggesting a growth rate of 156.94% from 2020.
This forecast is good news for long term investors if Apple can maintain their current 30% cut from App store purchases. However, if Apple are forced to lower their App store fees the forecasted growth becomes less impressive. This point brings us to the risks Apple investors could face over the next 5 years.
What are the risks facing Apple stock over the next 5 years?
The global shortage of semi-conductors and COVID-19 restraints has placed additional pressure of large scale tech firms such as Apple. Last quarter, Apple reportedly slowed down production of the MacBook and iPad due to chip shortages.
In addition, Tim Cook estimates Apple to lose $3-4 Billion in the next quarter as a result of the shortage. The semi-conductor shortage seems to be a industry wide issue and will likely continue to impact business through 2022.
Apple Vs. Epic Games
In addition, some analysts such as Tim Long at Barclays see Apple potentially changing their Appstore commissions due to unfolding events such as the Epic Games vs. Apple lawsuit. Jennifer Rie, a senior litigation analyst for Bloomberg Intelligence noted that the lawsuit could influence the way Apple controls IOS and could see Apple take a hit in revenue as a result.
However, Apple argue that the actions of Epic Games bypassing in game purchases was a breach of contract and therefore had grounds to remove the game from the Appstore.
The Bottom Line – Apple stock forecast 2025
In summary, the analyst price targets illustrate a bullish sentiment with the average target showing upside from the current trading price. In addition, the product sales growth during a period of shortages and COVID-19 uncertainty is positive news for investors. However, it is important to note the risks facing Apple stock.
Primarily the evolving chip shortage which will restrict supply of Apple products alongside an unfolding lawsuit with Epic Games. Further supply constraints may place additional pressure on Apple’s share price in the near future.
Written by Tyger Fitzpatrick
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Subscribe to our Youtube channel here.
We are now official partners with Tradingview
Firstly, Tradingview is a social network of 30 million traders and investors using the world’s best charts and analysis tools to spot opportunity in global markets. You can sign up to Tradingview by clicking the banner below. Tradingview allows you to follow your favorite assets, find trading ideas, chat with others, spot trends, and place trades directly on our charts.
Looking to start trading in Australia or the UK?
Do you live in Australia or the United Kingdom and looking to invest in the US market? Good news! We’ve partnered with Stake. Trade 4,500+ US stocks and ETFs with $0 brokerage and no fx fees per trade. Use our code “YIG” to receive a free stock when funding your new account.
In addition, Stake is one of the leading US trading platforms for Australian and UK investors. Click hereto start trading US stocks with a streamline trading experience. Lastly, for more information on our referral program and how it works click here.