How Apple’s market value can surpass $4 trillion

The value of Apple’s buybacks is often under-appreciated, especially during a period of slowing growth like Apple is experiencing currently, but steady buybacks and high-single-digit earnings growth are all it could take for Apple to pass the $4 trillion mark within five years.

Daniel Foelber for The Motley Fool:

Apple is possibly the single-most powerful consumer-facing brands in the world. Its most exciting area of growth isn’t products but services.
For the nine months ended July 1, 2023, services made up 21.4% of total revenue but 34.6% of gross profit. The services segment notched a 70.9% gross margin during the period, which illustrates the value it brings to Apple’s bottom line.
Most importantly, services boost customer interaction with Apple’s ecosystem. Apple Pay, Apple Music, and Apple TV+ are just some of the many services that improve the iPhone experience. These services build value even if the improvements to the products are incremental. It’s also a way for Apple to generate recurring revenue instead of relying on customers to upgrade their devices…
Many businesses that enjoyed a surge in sales during the pandemic suffered steep drop-offs over the last couple of years. That’s not the case with Apple, which is facing merely a couple of percentage points of top and bottom-line declines…
All signs point toward Apple sustaining its rapid buyback pace or even accelerating it.
If you take a conservative estimate and assume the same amount of buybacks for the next five years — and factor in Apple’s current market cap of $2.74 trillion — Apple should be able to boost EPS by at least 14% over the next five years on buybacks alone. This alleviates pressure on Apple’s organic growth.
Even if the business is only growing earnings at, let’s say, an average of 8% a year over the next five years, Apple’s earnings would still be 47% higher in five years. And if you factor in 14% fewer shares outstanding, you’re looking at EPS growth of approximately 70% in five years.

MacDailyNews Take: With Apple up over 2% in trading today, the company’s market value is currently $2.83 billion.
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Apple on Monday, January 3, 2022 became the first company to hit a market value of $3 trillion. As we wrote that day, “Merely a waypoint. Apple remains significantly undervalued. You haven’t seen anything, yet!”
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