Microsoft Corporation (NASDAQ: MSFT) recently overtook Apple Inc. (NASDAQ: AAPL) as the world's most valuable company while also setting its all-time high; expectations are high for Apple to make a similar move.
The tech giant last closed at a new record in the first half of December, and while its shares started the new year on the back foot, Apple is already ramping up again. It was up almost 8% in the past week alone and is now less than a 3% move from a new high.
For the first time, Apple shares could be on the verge of a rally through the $200 mark and beyond. Here are three tailwinds in place that should make this happen.
Improving macroeconomics
First up is the improving macroeconomic situation, which has been brightening for some months. It's looking like the Federal Reserve (the Fed) has managed a soft landing, that is, getting inflation under control without forcing the economy into a recession.
With victory within touching distance, investors are now looking to 2024 as the year when the Fed starts cutting rates again, which is one of the most bullish economic levers they could pull. The thinking here is that companies can borrow for less and fund their growth for less, as lower rates make money cheaper. Tech stocks tumbled over the last year because the Fed's rate hikes weighed companies' profitability potential.
With that weight looking like it's about to get much lighter, investor sentiment is uniformly risk-on, and tech stocks stand to outperform again. Within that niche, the likes of Apple are expected to lead from the front.
Strong earnings
Apple's fundamental performance has also been increasing in recent quarters. While investors were once used to Apple never showing signs of contracting revenue, the rate increase started significantly impacting its earnings at the end of 2022. All through 2023, the company's revenue contracted in the year-on-year comparisons, but consistently less so.
That means that while for the quarter ending December 2022, revenue was down 5.5% year on year, for the quarter ending September 2023, it was only down 0.7% year on year. With Apple set to report next week, investors will look for this trend to continue improving and, ideally, to show a full return to growth.
The company has a strong track record of topping analyst expectations, and if they can manage to do so in next Thursday's report, there's every reason to think shares will blow past the $200 mark if it hasn't occurred already.
Bullish comments
With so much positive momentum in play, it's perhaps not surprising that Apple is attracting the right kind of attention from Wall Street analysts. Investors closely watch commentary and outlook from these teams, and many make decisions heavily influenced by the same.
To that end, Apple was on the receiving end of a bullish upgrade from the Bank of America team last week when they upped their rating on the stock from "neutral" to "buy." They see Apple as being remarkably well-positioned to benefit from the emergence of generative artificial intelligence (AI), with its Vision Pro hardware set to be a firm favorite among consumers.
They set a fresh price target of $225, which points to a targeted upside of at least 15% from where shares were trading on Wednesday morning. That kind of expectation does wonders for a stock, and investors considering getting involved will benefit from the positive momentum it brings.
Don't be surprised if more bullish commentary from the analysts comes out in the coming days and weeks. Each time it does, Apple's path to $200 and beyond becomes much easier.
