3 reasons Apple deserves $4 trillion market cap — and what to expect next
Could Apple expectations be any higher? The Club stock made history Tuesday, eclipsing a $4 trillion market capitalization for the first time ever, joining fellow portfolio names Nvidia and Microsoft above that level. (Nvidia on Wednesday became the first company to go above a $5 trillion valuation .) Apple shares closed just below the $4 trillion milestone Tuesday and were back and forth a session later. The remarkable comeback for Apple shares, which earlier this year were left for dead, occurred as CEO Tim Cook got on the right side of President Donald Trump ‘s desire to bring manufacturing back to the U.S., and more recently, as demand for the new iPhone models turned out to be stronger than analysts had expected. Throw in the favorable ruling in a landmark antitrust case that secures Apple’s lucrative search partnership with Alphabet’s Google, and the tech behemoth’s upcoming earnings report Thursday evening becomes one of Apple’s most pivotal in recent memory. That’s because a seemingly long-awaited iPhone upgrade cycle finally taking shape, combined with other tailwinds, have bought Apple more time to deliver on its crucial generative artificial intelligence features before its lackluster AI rollout comes back into focus. AAPL YTD mountain Apple YTD Bank of America, however, is not worried about AI. In fact, the analysts said in a Wednesday note that Apple will be an “eventual winner” in artificial intelligence. That’s why BofA thinks Apple’s earnings could double from 2024 to 2030. The analysts also increased their Apple price target to $320 per share from $270, implying an 18% upside from Tuesday’s close. Earlier this week, JPMorgan said Apple shares are “heading into the upcoming earnings print with a greater halo of positivity than any time in the past year.” The analysts cited “robust revenue and margins” that will “reinforce to investors a positive product cycle for the company.” The analysts raised their price target to $290 from $280. Despite positives, Apple naysayers continue to doubt the stock due to management’s underwhelming artificial intelligence rollout. Apple Intelligence, the iPhone maker’s generative AI suite, has faced a series of delays. Making matters worse, the company still hasn’t shared much about its roadmap despite postponing its AI-enhanced version of Siri until at least 2026. Plus, top AI talent at Apple keeps getting poached by Big Tech peers such as Club holding Meta Platforms . Still, Apple has enough going for it to shake off these AI concerns heading into the company’s earnings report. In fact, the Club sees three reasons that investors have been able to overlook the overhang. iPhone 17 demand For starters, the latest lineup of iPhone 17 models, along with the iPhone Air, has shown promising signs since their launch in September. Early iPhone 17 lead times, a gauge for consumer demand, have largely exceeded those of last year’s iPhone 16 debut. Recent data from research firms reinforce this idea, too. According to Counterpoint Research , Apple’s global smartphone shipments increased 4% year-over-year in the third quarter. The report, published on Oct. 15, also described the newest iPhone 17 series as being “well received” and having experienced “record-breaking pre-booking across regions.” Upbeat commentary from cellular providers on iPhone sales, Apple’s biggest source of revenue, has also been welcomed news. Late last month, Mike Sievert, then-outgoing CEO of T-Mobile , said the company experienced all-time high iPhone sales. “We just had the biggest iPhone week,” Sievert, who has since stepped down as chief executive, told Jim Cramer in a CNBC interview. “We’re up double digits from a year ago,” he said at the time. For the Club’s part, Jim has described the iPhone 17’s debut as “gigantic,” adding that the newest devices are “more of a bargain” than past versions. “What Apple is saying is, ‘Look, these are full price, but because you get a discount from the carriers like Mike Sievert at T-Mobile and the value of the trade-in turned out to be more than we thought.’ So, there’s been no increase in price,” Jim said in September. Baird analysts said a solid reception to the iPhone could mean better-than-expected fiscal 2025 fourth quarter results. “We continue to view AAPL as well positioned to report upside to Sep-qtr expectations and guide Dec-qtr above Street expectations later this week,” Baird said in a Tuesday note. “Our checks suggest this may be more than the average iPhone refresh cycle, as lead times for the base iPhone 17 continue to outpace last year’s levels (6+ weeks post launch).” The analysts, in turn, hiked their Apple price target to $280 from $230. Tariffs Apple is better positioned this quarter because of how management handled Trump’s tariff demands. After the White House threatened Apple with an additional 25% tariff on iPhones made outside the country in May, Cook announced in August an additional $100 billion investment into U.S. manufacturing to get on a better footing with the White House. That was a big deal for Apple, given that a lot of its manufacturing still takes place in China, which is also the company’s second-largest market. Apple has been able to mitigate a lot of these risks from tariffs, which could force the company to eat extra costs or raise device prices. The latter could dampen demand down the road. Google ruling Apple is in a better position than feared this quarter after a federal judge ruled in early September that Google could continue paying Apple billions per year to be the default search engine for the iPhone and other devices. The ruling follows a years-long battle between the Justice Department and Google over alleged violations of U.S. antitrust laws. Jim described the news as “shockingly favorable” at the time, adding it was a “big win for Apple.” The decision means that Apple can continue raking in billions for its high-margin services division with little cost associated. (The services unit garners revenues from subscriptions and licensing fees through offerings like Apple TV, iCloud, Apple Music, the App Store, and more.) Apple is estimated to have been paid $20 billion annually by Google as part of the deal. Overall, TDCowen analysts said Monday that Apple stock sentiment is “markedly positive” into quarterly earnings, in part, because these search revenue streams from Google remain intact. And, it can serve as a blueprint for AI chatbot placement. To be sure, Apple does have a high bar to hit this earnings season following a great third-quarter release in July. The company posted its biggest growth in quarterly revenue since 2021. Yet again, Apple notched an all-time high base of active devices in all of its product categories. The crucial services business hit a new record, supported by better-than-expected gross margins. Bottom line High expectations aside, Apple still seems well-positioned heading into the release. According to market data provider LSEG’s consensus estimate, Apple is expected to report earnings-per-share (EPS) growth of 8% to $1.77 in its final quarter of its 2025 fiscal year. Revenue in the three months ended in September is seen rising 7.7% year-over-year to $102.24 billion. Since the iPhone’s September launch, the Club has pounded the table on the newest line of smartphones. It’s been especially important as Apple faces an increasingly crowded smartphone market in China, too. Investors can heave a sigh of relief into the quarter, as Apple has been able to bypass two major headwinds that weighed on shares earlier this year as well: Trump’s tariff demands and the DOJ ruling. While Apple’s staggered artificial intelligence rollout is something to watch, we have said time and time again that the company doesn’t need to be the first to market to win. Why should AI be any different? What matters more is management’s track record of delivering the best, most innovative devices. Apple didn’t invent the smartphone, but the iPhone still remains the “greatest product in the world,” Jim has said. That’s why we continue to maintain our “own, don’t trade it” thesis on this high-quality stock. (Jim Cramer’s Charitable Trust is long AAPL, META, MSFT, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
<
