Apple bull expects iPhone maker to hit $3 trillion market cap in 2022

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Various models of the Apple Inc. iPad at the company’s Yeouido store during its opening in Seoul, South Korea, on Friday, Feb. 26, 2021.
Jean Chung | Bloomberg | Getty Images

Apple could hit a $3 trillion market capitalization in 2022, according to Wedbush analyst Dan Ives, who is bullish on the tech giant.

The iPhone maker’s shares are down about 5% year-to-date. Earlier this year, investors dumped the company’s stocks following a historic December quarter.

Apple is the world’s most valuable company with a current market cap of around $2.1 trillion. It crossed the first trillion in 2018 and the $2 trillion mark in 2020. Analysts, including Ives, have previously talked about Apple’s roadmap to the record $3 trillion mark.

“We think ultimately 12 to 18 months from now,” Ives told CNBC’s “Street Signs Asia” on Tuesday when asked about a possible timeline to the next milestone.

“If you look at the innovation, if you look at the supercycle playing out in the services business right now, I believe this is just sort of the next stage of growth,” Ives said, adding it is set to prove to skeptics that Apple remains focused on innovation.

In late April, Ives increased Apple’s price target from $175 a share to $185, maintaining an outperform rating on the stock. Apple’s shares closed at $125.90 per share during normal trading hours on Monday.

Software services

Apple has been viewed as a hardware company for years while CEO Tim Cook pushed the narrative that the firm’s iOS operating system has a services ecosystem — built around a base of more than one billion device users — that’s a big part of its future.

But the mix of hardware and software has evolved and in 2020, the tech giant received its biggest endorsement from Wall Street and investors.

Ives values Apple’s software services business at about $1 trillion at the moment, and expects it to increase to about $1.5 trillion in order for the company’s market value to hit $3 trillion.

“They have put an iron fence around their install base, continue to monetize it, and the bears and skeptics will continue to doubt them,” he said.

He said Apple continues to “prove them wrong.” He added: “Which is why when I look around the corner, despite this digestion period, I see a $3 trillion market cap (in) 2022.”

At its Worldwide Developers Conference, or WWDC, on Monday, the company showed off a slew of new updates for Apple’s major products. It included the iOS 15 — the latest version of the iPhone operating system.

New iPhones are also expected later this year, while an Apple Car is also in the works.

Ives said that at the moment, Apple is laying the foundation for the next stage of growth where software and services play important roles.

Risks to the $3 trillion target

There are several potential risks that could hinder Apple from reaching the historic $3 trillion market capitalization, according to Ives.

They include a court battle with Epic Games, maker of the popular video game Fortnite, where Cook faced sharp questioning from the judge last month.

Last year, Apple removed Fortnite from its iPhone App Store, saying that the game violated its guidelines for its software distribution platform. Epic Games responded by filing a lawsuit within hours, accusing Apple of anti-competitive behavior. Apple then filed counterclaims and responses, seeking damages for Epic Games’ breach of contract.

Ives also pointed to growing regulatory scrutiny around the world. The European Commission said in April that the iPhone maker “abused its dominant position” in the distribution of music streaming apps through its Apps Store.

CNBC’s Eric Rosenbaum contributed to this report.