Apple may be a 4T company by next year, but is it a buy now?

Key Points

• Dan Ives of Wedbush has a bullish call on Apple stock, including his prediction of a $4T market cap by the end of 2024. 
• Services account for a good chunk of the company's current revenue, and Ives believes it will continue growing. 
• However, don't discount the resilience of demand for the iPhone, which Ives believes is being underestimated. 

Apple Inc. NASDAQ: AAPL is one of the most hotly debated stocks for investors to consider. Nearly everybody believes that Apple is one of the most well-run companies among technology stocks. The debate arises when deciding whether Apple's best days are behind it. The bears will point to the company's reliance on hardware sales, which puts an outsized emphasis on its iconic iPhone.  

On the other side of the debate are analysts like Dan Ives of Wedbush. Ives is one of the leading tech analysts, and when he offers an opinion, it carries weight with the market.  

To that end, Ives has recently issued a forecast for a $4 trillion market cap for Apple by the end of 2024. In 2022, Apple became the first company to hit the $3 trillion mark. Ives also raised his price target for AAPL stock by $10 to $250. There are a couple of key reasons underpinning Ives' bullish prediction.  

Services Are Still Being Undervalued 

The Services unit encompasses Apple TV, the App Store, Apple Music, iCloud and other subscription services. It's significant because Apple bulls continually remind investors that Apple is more than an iPhone; it's an ecosystem. Essentially, one product leads to another, which leads to another and so on. And Apple users tend to be as brand loyal to the company's services as they are to its hardware (i.e., iPhone and Apple Watch).  

In Apple's fourth quarter earnings report, the Services division posted $19.8 billion in revenue – a 17% jump from the prior quarter. And it now makes up approximately 25% of the company's revenue. For all that, Ives believes the market is not fully pricing in the company's services. 

The iPhone may not be dead yet 

A compelling argument from Apple bears is that the company's revenue continues to be lower year-over-year. The reasoning is that if Services revenue is growing, then hardware revenue must be shrinking.  

And the concern is that the company's latest version of the iPhone, the iPhone 15, will be underwhelming. Of particular concern is China. Not only is Apple facing a slower Chinese economy, say the bulls, but it's also fighting a supposed lack of appetite for the iPhone in China. 

Not so fast, says Ives. His channel counters report that iPhone sales in China already exceed estimates and demand remains strong. Ives predicts that iPhone 15 sales will beat estimates when Apple reports its first quarter numbers in February 2024. 

One of the points to which Ives continually refers is that 25% of the company's iPhone base has not upgraded their device in at least four years. That creates a fertile market for iPhone sales.  

What to do with AAPL stock? 

Despite declining revenue, AAPL stock is up 51% in 2023. However, it is finding a level of resistance around $195. A controversy with its Apple Watch may prevent the stock from going higher in the short term.  

The last time Apple shareholders faced this level of resistance was when the stock was trading at around $179 in December 2021. It took about 18 months for the stock to break through that level. It even fell back below that level during the market correction in September and October.  

That being said, the stock may be due for a pullback in the short term. Nevertheless, when you're looking at a stock that's up 420% in the last five years, any dip should be seen as a buying opportunity if you're an investor with a long-term outlook.