Apple (NASDAQ: AAPL) Share prices are up about 26% so far in 2024 (at time of writing), closely matching the 26.8% gain driven by the S&P500 index. Given this above-average (near) one-year performance, investors may wonder whether the world’s largest company by market capitalization has room for more upside in the new year.
After all, the majority of Apple’s businesses have already matured, and the company has been growing at a modest pace lately. For example, Apple’s revenues rose just 6% year over year in the fourth quarter of fiscal 2024 (ending September 28) to a record $94.9 billion. However, adjusted earnings rose at a faster pace of 12% to $1.64 per share (after deducting the one-off charge incurred as a result of the withdrawal of the state aid decision by the European General Court).
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However, a closer look at Apple’s latest quarterly results indicates that 2025 and 2026 could be better years for the company.
In the last reported quarter, Apple delivered mid-single-digit revenue growth and double-digit earnings growth. However, the company’s fiscal 2024 revenue rose only 2% to $391 billion. Earnings of $6.08 per share were down from last year’s figure of $6.13 per share.
So, Apple posted much faster growth in the last quarter of fiscal 2024. That can be attributed to the launch of the company’s latest generation of iPhones, which went on sale at the end of September. Apple’s latest iPhone 16 models appear to have played a key role in helping the company increase its shipments 3.5% year over year to 56 million units in the third quarter of calendar 2024, according to IDC.
It’s worth noting that Apple’s shipments increased last quarter Samsung witnessed a contraction of 2.8% to 57.8 million units. Samsung has been the leading player in the fast-growing generative AI smartphone market this year, so it appears that the launch of AI-enabled smartphones has allowed Apple to make some inroads into this lucrative market.
This likely explains why analysts expect Apple’s revenue to rise 6% to $414.5 billion in fiscal 2025 (which coincides with the nine months of calendar 2025). Earnings, on the other hand, are expected to rise nearly 10% to $7.39 per share. The growing adoption of generative AI smartphones will play a central role in accelerating Apple’s growth this year.
After all, shipments of generative AI smartphones are predicted to increase by 73% by 2025 from this year’s estimated shipment of 234 million units. This means that almost 405 million generative AI smartphones could be shipped next year. Apple is the second largest player in the global smartphone market with a 17.7% share, just behind Samsung’s 18.3% share.
So Apple is in a solid position to take advantage of the enormous possibilities that generative AI smartphones offer, especially considering that it now has a smartphone range to cater to this space. More importantly, Apple’s massive installed base of devices that are in an upgrade period should boost shipments in 2025 and beyond.
JPMorgan Analyst Samik Chatterjee estimates that Apple’s iPhone shipments could increase 10% in the current fiscal year from the estimated 222 million units sold in fiscal 2024. The analyst expects the trend to continue in the next fiscal year as well continue, with estimated shipments of 268 million units in fiscal year 2026.
Add to that the fact that Apple could choose to monetize its suite of generative AI features, and it’s easy to see why analysts expect the company’s revenue and profit growth to accelerate in fiscal 2026.
As we see in the chart above, Apple’s earnings are expected to rise to $8.31 per share in fiscal 2026. If we multiply the expected earnings after two years by the average price-to-earnings ratio of 50 in the US technology sector, we would Apple’s stock price could rise. reached $415 within a few years. That would be a 73% jump from current levels.
Apple currently trades at 39 times trailing earnings and 32 times forward earnings, meaning investors can buy these tech stocks at a relatively attractive valuation. Of course, you might doubt that Apple deserves a 50x earnings multiple given its slow growth rate right now, but even if it trades at a relatively cheaper 40x earnings after a few years, it could return 38% earnings versus the current levels. This gives investors a good reason to buy the stock now.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has and recommends positions in Apple and JPMorgan Chase. The Motley Fool has a disclosure policy.
Where will Apple’s stock be in two years? was originally published by The Motley Fool
