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Why Apple's stock is on fire right now

·Technology Editor
·4 min read
In this article:
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Apple (AAPL) appears well on its way to being the first company to hit a $3 trillion market cap. As of the opening bell on Thursday, the company’s stock was sitting at $174.91 per share, and it only needs to hit $182.86 before crossing the historic point.

So what’s behind the run on Apple’s stock? The continued success of the company’s iPhone lineup, not to mention its accessories like the Apple Watch and AirPods are, of course, a large part of the story.

But the build-up in anticipation of its next-generation of products including the company’s rumored AR/VR glasses and its decision to produce its own chips seem to have investors eager to jump on the company’s bandwagon.

“We believe ... Apple is well on its way to being a $3 trillion market cap during 2022 (or sooner) as the Street catches up to this growth story,” Wedbush’s Dan Ives wrote in a recent note.

Let’s look at Apple’s 2021 to get some context about its recent performance. In its last four quarters, the company has seen its net sales increase by 21%, 54%, 36%, and 29%. And while much of that was driven by iPhone sales thanks to the release of the 5G-capable iPhone 12 in September 2020, growth across Apple’s iPad, Mac, Services, and Wearables businesses has been just as robust.

That’s thanks to not only the release of Apple’s newest iPads, including a new iPad mini and M1-powered iPad Pro, but its new Apple Watches and MacBooks, which now run on the company’s M1 line of chips.

But stock prices are a bet on a company’s future performance. And Apple’s rumored lineup has a lot of potential. One of the most enticing rumors is Apple’s effort to build its own electric car. In September, Apple executive Kevin Lynch, who previously oversaw the Apple Watch, reportedly moved to oversee the company’s automotive efforts.

And in November, Bloomberg reported that Apple is powering ahead with its vehicle program to create a fully self-driving car. The Apple car effort has gone through a number of permutations over the years, with Apple moving from an initial vehicle concept to moving on to only building the technology behind self-driving capabilities, to going back to building its own vehicle.

In January Hyundai and Kia were linked to a possible deal to help Apple build its car, but the collaboration seemed to fall apart after the automakers let word slip of the team-up.

That doesn’t mean Apple gave up on its effort, with the company pushing forward with its plans on its own for now. It’s still unclear when we’ll see an Apple Car, with potential timelines ranging from five to 10 years.

Then there’s Apple’s AR/VR headset and glasses. The company is reportedly preparing to put out a version of its own headset sometime in 2022, with a pair of glasses coming sometime later.

The hardware could provide a large boost to the still nascent AR/VR industry, not to mention 2021’s biggest tech buzz phrase: the metaverse.

Apple CEO Tim Cook speaks during an Apple launch event in the Brooklyn borough of New York, U.S., October 30, 2018. REUTERS/Shannon Stapleton
Apple CEO Tim Cook speaks during an Apple launch event in the Brooklyn borough of New York, U.S., October 30, 2018. REUTERS/Shannon Stapleton

In the here and now though, Apple, like other tech firms, has had to contend with the ongoing effects of the global chip shortage and snarled supply chain. Apple has already had to cut production of its iPhones by 10 million units due to a shortage of chips from Texas Instruments and Broadcom, Bloomberg reports.

In November, Reuters reported that the company was cutting iPad production to feed chips to the iPhone. More recently, Nikkei Asia reported that Apple is telling manufacturers to halt production of the iPhone due to the chip issue and power problems in China.

The limited availability of Apple’s iPhone, according to Bloomberg, has led some customers to cut their losses and pass on the phone for now. That’s led to weakening demand for the iPhone.

Still, Apple’s stock was up more than 13% over the last three months as of mid-day Thursday, and more than 69% year-to-date. That easily outpaces the broader S&P 500, which is up 25%, as well as other Big Tech names including Google parent Alphabet, Amazon, Microsoft, and Facebook parent Meta.

“While the supply chain issues have curtailed some growth for Apple on this massive product cycle playing out across its entire hardware ecosystem, we believe the pent-up demand story for Cupertino is still being underestimated by investors with chip issues a transitory issue in our opinion,” Ives wrote in his note.

Supply chain issues aside, Apple’s future product line continues to get plenty of attention that could help the tech giant pass the $3 trillion valuation mark in the coming days or weeks.

Due to an editor's error, this article previously stated Apple shares need to be at $185 for the company's market cap to hit $3 trillion. In fact, they need to hit $182.86.

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