As evidenced by its market cap of $3.9 trillion, Apple (AAPL 1.42%) is one of the most valuable businesses on the face of the planet. To get to this point, it’s no surprise that the share price has performed exceptionally well. Just in the past decade, it has soared 953% (as of March 2).

Investors are always thinking about the future. Is Apple stock headed to $1,000?

Image source: Getty Images.

Apple’s dominant competitive position should remain intact

With the ongoing artificial intelligence (AI) spending boom, critics have been disappointed with Apple’s lack of progress thus far. Its big tech peers are pouring hundreds of billions of dollars into AI investments. There is a concern that Apple will fall behind.

I believe these fears are a bit overblown. In my view, Apple’s dominant competitive position, supported by its incredible brand, customer loyalty, and top-notch innovation, isn’t going to fade anytime soon. The business should still perform well in a world that might become more AI-driven.

That’s because Apple has a monster distribution advantage. It has 2.5 billion active devices around the world. And with the iPhone, it sells the single most important hardware device that has been relevant for nearly two decades. There’s no reason right now to believe that a totally new product will replace the iPhone and become the key gateway for people to access their digital lives. This supports Apple’s staying power over the long term.

Today’s Change

(-1.42%) $-3.73

Current Price

$258.79

Investors should consider profit growth and valuation

Apple shares need to rise 278% from the current price of $264.85 to reach $1,000, which should happen eventually. Profit growth and valuation are two of the most important variables to think about that will have an impact.

On the profitability side, it’s reasonable to expect the gains to moderate going forward. Apple simply isn’t going to expand at a rapid pace that might have been achieved in the past, given the sheer size of the company today. Sell-side analysts’ consensus view is that earnings per share (EPS) will increase at a compound annual rate of 11.5% between fiscal 2025 and fiscal 2028.

When it comes to valuation, Apple trades at a price-to-earnings (P/E) ratio of 33.5. It’s certainly deserving of a premium multiple.

If the P/E ratio stays constant, investors can expect Apple stock to hit $1,000 in just over 12 years. This is based on the 11.5% yearly projection for EPS growth continuing indefinitely.

But maybe a P/E ratio of 30 can be considered a fair valuation. And perhaps you think EPS gains will come down to 10% per year. In this instance, it will take longer than the 12-year time frame to get to $1,000 per share.