Apple's Growth Expected to Accelerate Next Year, but Whether its Multiples Justified?

Apple Inc. (AAPL) continues to hit new all-time highs as analysts widen the valuation multiples for the stock. iPhone sales remain Apple's biggest source of revenue. The device accounted for 55% of Apple's revenue in the first six months of fiscal 2023 (ended 1 April), generating $117 billion in sales over the past few quarters. The company's iPhone 14 series has thrived in challenging times, pushing Apple's iPhone average selling price (ASP) to $988 in March 2023, up from $882 in the same period last year.

It's worth noting that Apple's iPhone shipments fell just 2% YoY in Q1 2023, when the overall smartphone market fell nearly 15%. This suggests that customers are willing to open their wallets for iPhones, and this is where the opportunity for Apple has always been.

Wedbush Securities has rattled the market by claiming that Apple is on its way to a $4 trillion market cap, as the “tech giant is playing chess while others are playing checkers”. Wedbush is calling for a $220 price target, which would put AAPL's market cap at $3.5 trillion. Apple shares would have to trade at mid-30x P/E multiples to reach a $3.5 trillion valuation, which might not be quite justified at current growth rates. Apple's FY24 revenue is expected to rebound to almost 7% growth, which isn't that impressive given that its Services wing has grown from $50 billion in FY20 to a run rate of almost $84 billion now.