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Time for Apple ETFs on Optimism for Holiday Season & Beyond?

Sanghamitra Saha
·4 min read

Apple Inc. AAPL has recorded more than 50% gains this year (as of Dec 11, 2023). However, its performance lagged some of its tech peers due to subdued demand for its hardware products, influenced by a cautious consumer sentiment.

But the fate of Apple could rebound from this holiday season. At least, Wedbush analyst Daniel Ives believes so. Even Warrant Buffett’s Berkshire Hathaway has 50% of its weight in Apple, up from about 39% in the fourth quarter of 2022. Let’s delve a little deeper (read: Buffett's Favorite 4 Sectors: ETFs in Focus).

Insight From Wedbush Analyst Daniel Ives

Wedbush analyst Daniel Ives, who maintains an Outperform rating on Apple, has raised the price target from $240 to $250.  Ives holds an optimistic view regarding Apple's future, predicting that it will become the first company to reach a market capitalization of $4 trillion.

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Apple stock was priced at $193.18 with a market cap of $3.04 trillion at the end of Dec 11, 2023. Ives anticipates that this target of $4 trillion market cap will likely be achieved by the end of 2024. This positive outlook stems from the expected growth and monetization prospects for the company in the upcoming year.

Expectations for a Strong Holiday Season

The analyst also foresees a robust holiday season for Apple, with expectations of iPhone sales outpacing forecasts for the December quarter. Strong upgrade activity in both the United States and China is also expected to contribute significantly to this favorable trend.

What Lies Ahead in 2024?

Ives highlights several factors that contribute to Apple's positive outlook. These include an expected increase in the average selling price of Apple products, projecting it to be $925 compared to the range of $825-$850 observed in recent years.

Shares of the tech giant suffered in September amid reports of China planning to expand a ban on the use of iPhones to government-backed agencies and state companies. These concerns are expected to moderate as Apple appears to be weakening manufacturing ties with China. Talks are doing rounds that Apple is relocating its manufacturing base from China to India (read: What Lies Ahead for Apple ETFs After iPhone Use Ban?).

For 2024, Apple anticipates potential growth opportunities with new MacBooks featuring M3 chips and the launch of the Vision Pro headset. Apple’s focus on augmented reality/virtual reality (AR/VR) technologies presents growth opportunities for the long haul.

Subdued Hardware Sales Growth to Be Nullified by Strong Services Revenues?

Ives points out that Services revenues have been experiencing steady double-digit growth. Apple’s Services and Wearables businesses are expected to drive top-line growth in fiscal 2024 and beyond. While Apple's core business revolves mainly around its flagship iPhone, the Services division has become the company's cash cow lately.

Apple's efforts to expand its ecosystem through collaborations with companies like Samsung and Amazon bode well for the Services sector. The subscription-based video streaming, news, and gaming services are anticipated to thrive due to Apple's extensive user base. Plus, the App Store's strong sales, combined with the widespread adoption of Apple Pay and Apple Music, have also contributed to this growth.

What Does Valuation Say About the Stock?

Apple shares are currently trading at 28.41X forward 12-month earnings, which compares to 27.72X for the Zacks sub-industry, 24.4X for the Zacks sector and 19.09X for the S&P 500 Index.

Although Apple’s current multiple is higher than the sub-industry, it is still lower than sub-industry’s five-year high of 32.32X.

Are ETFs Better Bets?

Investors intending to follow Warren Buffett but still wary of the slowing sales of Apple may take the ETF route. This is because ETFs helps investors to mitigate one company’s average performance with the other companies’ stellar results.

Below we highlight a few ETFs with heavy exposure to Apple for investors seeking to bet on the stock with much lower risk.

iShares Dow Jones US Technology ETF IYW – AAPL takes the second spot with 18.07% weight. The fund has a Zacks Rank #2 (Buy).

Select Sector SPDR Technology ETF XLK – AAPL holds the second spot with 22.69% weight. The fund has a Zacks Rank #2.

Vanguard Information Technology ETF VGT – AAPL occupies the first location with 20.40% weight. The fund has a Zacks Rank #2.

 

 


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Apple Inc. (AAPL) : Free Stock Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

iShares U.S. Technology ETF (IYW): ETF Research Reports

Vanguard Information Technology ETF (VGT): ETF Research Reports

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