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Apple stock (NASDAQ: AAPL) had a solid 2021, rallying by almost 39% year-to-date, trading at all-time highs of about $180 per share, valuing the company at close to $3 trillion. This compares to the S&P 500 which remains up by about 29% year-to-date. While Apple’s reputation as a safe-haven stock has attracted investors through the pandemic, its financial performance has also been stellar. Sales rose by about 33% over the fiscal year ended September 2021, and EPS grew by almost 71%, driven by strong demand for the flagship 5G iPhones and computing products, such as the iPad and Mac. Apple has also navigated the ongoing chip shortage much better compared to other tech companies. Investors also appear to be enthusiastic following reports of Apple’s potential new products, which could include an augmented reality headset and a self-driving car. So what does 2022 have in store for Apple stock?
Apple’s revenue growth rate is likely to cool considerably through FY’22. The big remote working and learning-related surge in demand for computing products such as iPads and Macs is likely to abate this year and there have been reports that demand for iPhone 13 – which is seen as an incremental update over last year’s iPhone 12 – is also slowing. Moreover, on the macro front, the picture could be clouded by the Federal Reserves’ increasingly hawkish stance and outlook for as many as three interest rate hikes over the next year. Apple’s P/E multiple remains elevated versus historical levels, potentially making the stock more sensitive to rate hikes. Apple trades at about 30x our projected 2022 EPS, up from just about 11x in 2016 and around 22x in 2019. We value Apple stock at about $159 per share, marking a discount of about 11% from the current market price. See our analysis on Apple Valuation: Is AAPL Stock Expensive Or Cheap? for an overview of what’s driving our price estimate for Apple.
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