Where next for Apple stock as valuation drops below $2 trillion?

Josh Warner
By :  ,  Former Market Analyst

Apple’s valuation drops below $2 trillion

Apple shares fell 3.7% on the first day of trading in 2023 to end the session with a valuation of $1.99 trillion, marking the first time its market cap has dropped below the $2 trillion threshold since March 2021.

The stock has fallen over 30% since this time last year, when it hit its all-time high and became the first publicly-listed company to see its value, albeit briefly, surpass the $3 trillion mark.


Why has Apple stock lost ground?

The tough macro environment that emerged in 2022 hit Big Tech and growth stocks harder than most, leading them to underperform the wider market. The strong dollar has limited topline growth, rising costs pressured margins and rising interest rates have fuelled fears that demand will waver and that a recession could be around the corner.

These conditions are expected to persist in 2023, at least for the first half, which has created uncertainty over the outlook and dragged down Apple’s valuation.

We saw demand for hardware soften in the last financial year as the boom in tech sales seen during the pandemic eased and consumers tightened their belts in preparation for tougher times. We have already seen Apple cut expectations for iPhone sales, which make up over half of its total revenue, by 3 million units in response to weaker than expected demand and some analysts believe even more will be lost. Some analysts have lowered their forecasts by as much as 7 million units, while one of its suppliers named Murata said late last year that it believed Apple could make further cuts going forward. More recently, the Nikkei reported that Apple told suppliers to build fewer components for its AirPods, Apple Watch and MacBooks in the first quarter of the financial year because of waning demand.

Notably, weaker demand is thought to have primarily hit its lower-end iPhones. Meanwhile, sales of its higher-end models such as the Pro and Pro Max are thought to have proven more resilient, but Apple has struggled to get them to customers thanks to supply constraints that primarily stem from the COVID-19 disruption we have seen in China. That is demonstrated by the chaos seen at the largest iPhone factory late last year, when COVID-19 and worker unrest caused problems. Foxconn, which runs the plant, has said the plant is close to returning to full production but that has done little to allay fears that Apple has missed the opportunities offered over the key holiday shopping season and raised the question of how many of these sales will be pushed into 2023 or lost entirely. China will remain key to market sentiment toward Apple this year, both for supply and demand. China has swiftly eased its COVID-19 restrictions, but markets remain cautious considering a spike in cases and fears this could be exacerbated by the upcoming Lunar New Year which sees hundreds of millions of people travel back to their hometowns.


What to expect from Apple in 2023

Apple continued to deliver growth at both the top and bottom lines during its last financial year that ran until late September 2022, but at a much slower rate than what we saw the year before when demand for technology surged during the recovery from the pandemic. We saw revenue rise 7.8% and EPS rise 8.9% in the last financial year, slowing from the 33% jump in sales and 71% surge in earnings seen the year before.

Markets expect this slowdown to continue considering Wall Street forecasts Apple will deliver its most tepid growth since 2019 in the current financial year. Analysts believe the company will only manage to deliver a 2.7% rise in annual revenue and a 1.4% increase in EPS during the 12 months to late September 2023. Below is a more detailed outline on what Wall Street expects from Apple in the current financial year:

Annual 2023FY Estimates

YoY Growth


$405 billion


- iPhone

$206.5 billion


- iPad

$29.6 billion


- Mac

$38.2 billion


- Other

$44.7 billion


- Services

$85.1 billion


Diluted EPS




Importantly, Wall Street believes the second half of the financial year will be much better than the first. Sales and earnings are both forecast to remain under pressure in the first half thanks to waning demand for its hardware, including the iPhone. In fact, revenue is forecast to fall for the first time in over three years when it reports its next set of results for the first quarter that covers the busy holiday shopping season. However, analysts expect the company to bounce back in the second half and eek out tepid growth over the full year.

Current estimates suggest Apple will be one of the more resilient members of Big Tech in 2023, with the likes of Alphabet and Meta set to suffer another year of lower earnings. Cashflow remains strong and Apple continues to deploy its war chest of cash to repurchase shares and help inflate its bottom-line EPS figures. However, Microsoft – which boasts a valuation of $1.8 trillion and is hot on the heels of Apple – is forecast to be the best performer of the group this year, raising the question of whether it can claim the top spot in 2023?


When will Apple stock rebound?

Current forecasts suggest earnings will remain under pressure until the third quarter covering the three months to late June, when Wall Street hopes EPS will start to grow again before accelerating in the fourth quarter and setting a more positive tone in the 2024 financial year.

However, this will be contingent on an improvement in both the macro environment and other headwinds, such as those being experienced in China. Economists are hopeful that interest rates will peak sometime in 2023 to allow the discussion to turn from when they will peak to when the central bank will pivot and start bringing rates down again, which is the biggest catalyst that most equities can hope for this year. As for China, the COVID-19 situation looks rosier than it has for many years but there is still uncertainty ahead. Plus, the timing of any reopening could prove vital as the longer it takes, the greater the risk that Apple will lose sales or push them into the 2024 financial year as consumers wait for the next iPhone to be launched, typically in September.

The 41 brokers that cover Apple remain bullish on the stock considering they have an average target price of over $175, which is over 38% above the current share price and at levels not seen since last August. It is worth flagging that the target price has fallen in recent months, and we have recently seen some more dramatic cuts after Exane BNP Paribas just this week downgraded the stock to Neutral from Outperform and announced a price target of $140.

Apple currently trades at a blended-forward price-to-earnings ratio of 19.7x, according to data from Bloomberg, which is below the 21.7x average seen over the past five years. For context, that is lower than the current PE ratio of around 19.9x touted by the S&P 500.


Where next for AAPL stock?

Apple shares suffered a heavy fall on the first trading session of 2023 and closed at their lowest level in 18 months, supported by a spike in trading volumes. However, the stock is looking to recover some of the lost ground by trading up around 0.7% in early premarket trade today.

If the stock remains under pressure, we could see it continue to slide toward the next level of support we saw back in May 2021 at $122.25, with $119 coming into view beyond here.

However, we saw the RSI almost slip into oversold territory in late December to suggest shares could find some support around current levels. The first upside target that needs to be recaptured in the $130 bottom we saw back in June which, if achieved, could allow a swift return above the $138 mark.

Can Apple shares recover to send its value back above $2 trillion?


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