AAPL stock has seen strong gains of 60% from levels of $130 in early January 2021 to around $205 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. However, the increase in AAPL stock has been far from consistent. Returns for the stock were 35% in 2021, -26% in 2022, and 49% in 2023. In comparison, Arista Networks, another company that also benefits from generative AI, has seen its stock surge by over 300% over the same period. Arista is a market leader in high-speed networks catering to hyper-scalers and big corporations that are major stakeholders in the generative AI trend. Turns out, Arista is part of the 30-stock Trefis High Quality Portfolio, which has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Now, will Apple stock rally further going forward?
Apple is valued at about $202 per share, which is roughly in line with the current market price. Apple stock trades at about 31x FY'24 earnings, a bit higher than historical levels. However, Apple should see revenue growth pick up from the next fiscal year, driven by the generative AI trend. Margins are also likely to pick up, driven by a more favorable product mix skewed toward high-end devices, service sales, and lower component costs. See our analysis of Apple Valuation for more details on what's driving our price estimate for Apple and how it compares with peers.
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