Apple Euphoria Has Its Limits

Summary

• Apple remains well-poised for continued growth as its new smartphone breakthrough continues to create potential profits and it continues its expansion into new software, services, and hardware.
• However, even with a high-quality asset, reasonable and numbers-based expectations for price should be considered rather than limitless hopes.
• "Apple euphoria" is in some ways justified, but at now over $1 trillion and a stuck valuation multiple, real growth is tougher and tougher to create.
• The company's increasing shareholder capital return actions and still-gigantic pile of cash despite removal of repatriation barriers show its investment ability is slowing.
• Though I believe Apple still will grow its share price, it is undoubtedly now beginning to mature in many of its core segments even as some new expansion possibilities and sparks still remain.

I'm generally bullish on Apple (NASDAQ:AAPL). I previously described how my price target for Apple over the upcoming few months was $221 a share, which it surpassed recently as it now sits at $223.84 a share. My 12-month price target, as I've

described to subscribers

to Tech Investment Insights, expects moderate further growth this upcoming year.

However, in this case, I do need to cite Warren Buffett's famous saying in his 1989 shareholders letter, saying "[i]t's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Apple is right now a wonderful company at a fair price. However, given current sudden market euphoria towards the company after several years of doubting it heavily, particularly over its various technology changes such as wireless headphones and large-screen smartphones, I think some wariness of "Apple euphoria" is merited as well.

Based on current trends and Apple's success in gaining ground with its new line of high-price, new-capability smartphones, as well as continued growth in services and other brands, I believe Apple will continue to chug forward as it continues to gain ground in those areas.

However, it is also worth remembering that now the company is already over about $1.08 trillion and each bit of growth becomes steadily more difficult, particularly as it is now a very mature company that is already at the higher end of its possible P/E valuation multiple.

Growth remains possible and likely, but even with Apple's success and thwarting the doubters and all the money it is making, in terms of return on investment, it is becoming tougher and tougher to scale in the same way as Apple was back when it was a far smaller corporation.

The Key Drivers Behind Apple Growth

As I've previously discussed, much

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.