3 Reasons Apple Will Reach $1 Trillion In 2018

Some of the world’s most recognizable tech companies—including Facebook (NASDAQ:FB) , Amazon (NASDAQ:AMZN) , and Nvidia (NASDAQ:NVDA) —have dominated Wall Street throughout 2017. But as we approach the New Year, investors are focused on the biggest tech behemoth of them all, Apple (NASDAQ:AAPL) , as the iPhone maker nears the $1 trillion market cap milestone.

Shares of Apple have gained more than 48% year-to-date, giving the Cupertino, California-based company a valuation of about $881 billion ahead of the market’s open on Wednesday. This exceptionally bullish year means that Apple is less than another 14% surge away from becoming the first $1 trillion company in the world.

At the stock’s current pace, Apple will reach this milestone in no time. However, a new year brings new challenges, and we have already seen some hints that the tech rally will slow in 2018.

Profit taking throughout the sector, as well as political uncertainty—both at home and abroad, especially as tensions with North Korea continue to rise—could threaten the bull run of what is still considered to be a volatile segment of the stock market.

But Apple is hardly a trendy, high-growth tech stock. The company has become a widely-held stalwart of portfolios of all sizes, and its dominance of the consumer electronics market protects investors from some of the risks inherent to the tech sector.

With that said, let’s take a look at three catalysts that should lift Apple to the $1 trillion mark in 2018:

1. iPhone X Sales

In its fiscal fourth quarter, Apple reported iPhone sales of 46.677 million, beating our consensus estimate of 46.423 million. However, those results only included some of the initial sales of the iPhone 8 and 8 Plus and none of the sales of the highly-anticipated iPhone X.

Apple has not yet announced the report date for its first quarter results, but we expect that it will be sometime in late January. Of course, a strong iPhone sales cycle is priced into Apple's stock right now. Nevertheless, another sales surprise could inspire some post-earnings momentum, so investors might see Apple at $1 trillion as early as February.

2. Tax Plan

Another thing that has inspired some of Apple’s bullish run this year has been the looming Republican tax reform plan. While some details still need to be ironed out, the final bill will almost certainly include some sort of repatriation clause, which is great news for Apple and its massive overseas cash pile.

If the government cuts Apple a deal to bring some of that cash back home, it could inspire growth-oriented investments and further expansion. And the tax bill is also supposed to inspire more consumer spending, so Apple could see a boost to its top line throughout 2018 if the reform works as intended.

3. Apple Music and Original Content

In its most recent quarter, Apple said that its Services unit —which includes iTunes, Apple Music, Apple Pay, and Apple Care, among other things—witnessed record-high revenues of $8.5 billion, a 34.4% climb from the year-ago quarter.

Apple Music should continue to grow in 2018, and the company’s investments in this segment should start paying off soon. We know that Apple gave its top Apple Music executives about $1 billion to spend on content, including both music and new video initiatives. Investors already love Apple’s current revenue streams, so if the firm finds another money generator in its original content department, Wall Street will likely reward it.

Interestingly, Apple is not the only massive company that has invested in original content. To hear more about how media could be one piece that helps Amazon (NASDAQ:AMZN) surge to the $1 trillion threshold, listen to the latest episode of our exclusive Shopping for Stocks podcast.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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