I have made the case that AAPL will likely not grow very rapidly over the coming years, not nearly enough to justify buying at these prices. But perhaps the best argument to sell AAPL is due to the more attractive opportunities elsewhere. I have already mentioned FB and GOOGL, both of which trade at lower earnings multiples in spite of materially faster growth rates.
But beyond mega-cap tech, the broader tech sector has experienced a crash that has created numerous buying opportunities. Many tech stocks in my coverage are flashing buy signals and appear priced for phenomenal returns. Investors counting on the same reasons driving the rising stock price in the past to work moving forward are likely to be disappointed. I rate shares a hold but heavily emphasize that better opportunities are elsewhere. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it.
Our research is based on sources that we believe to be reliable. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. Further, we expressly disclaim any responsibility to update such research.
Past performance is not a guarantee of future results, and a loss of original capital may occur. None of the information presented should be construed as an offer to sell or buy any particular security. Apple Inc has relatively low volatility with skewness of 0.71 and kurtosis of 2.01. However, we advise all investors to independently investigate Apple Inc to ensure all accessible information is consistent with the expectations about its upside potential and future expected returns. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Apple's stock risk against market volatility during both bullying and bearish trends.
The higher level of volatility that comes with bear markets can directly impact Apple's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall. Rose 34% last year and has pulled back $10 this week from all-time highs due to the tech meltdown.
Expected to give only 2-3% earnings growth, but it usually surprises. Last year it suffered supply chain delays, but that should be a tailwind this year, including China. Services make up 19% of total sales and will grow a lot, and services offer much higher margins than sales. Shares of Apple soared after reporting earnings which comfortably beat consensus estimates. There are a lot of reasons to like the stock - growing dividends, share repurchases, and lots of profits.
Yet with the stock trading at 28x earnings, I question whether bullish arguments are driven by sentiment or rational thinking. Investors should question why AAPL has invested so much into share repurchases even as the valuation continues to soar. With the net cash position down to $80 billion versus the current market cap of nearly $3 trillion, the stock faces new challenges as I expect earnings to be volatile exiting this period of peak iPhone sales. This is an incredible time to sell and reallocate in the tech sector. Apple also appears to be getting more Android customers to migrate to its ecosystem, noting that it saw strong double-digit growth in the number of people who switched in Q3.
This is significantly positive, as Apple has done a good job locking in users and better monetizing them with pricier upgrades, new products, and services. While continued revenue growth and solid margin expansion should drive Apple's profits, shareholder returns could be magnified by Apple's massive stock buyback program. For perspective, the company has bought back an average of 5% of its stock each year over the last five years. Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company serves consumers, and small and mid-sized businesses; and the education, enterprise, and government markets.
It distributes third-party applications for its products through the App Store. The company also sells its products through its retail and online stores, and direct sales force; and third-party cellular network carriers, wholesalers, retailers, and resellers. Apple Inc. was incorporated in 1977 and is headquartered in Cupertino, California. Narrow-moat Apple reported stellar fiscal first-quarter results that came in substantially ahead of our estimates despite supply chain constraints and the ongoing chip shortage. Demand for the firm's latest iPhone 13 and MacBook Pro drove record iPhone and Mac revenue for the December quarter. We remain positive on Apple's ability to extract sales from its installed base via new products and services.
Zacks' proprietary data indicates that Apple Inc. is currently rated as a Zacks Rank 1 and we are expecting an above average return from the AAPL shares relative to the market in the next few months. Its Value Score of F indicates it would be a bad pick for value investors. The financial health and growth prospects of AAPL, demonstrate its potential to underperform the market.
Recent price changes and earnings estimate revisions indicate this stock lacks momentum and would be a lackluster choice for momentum investors. DescriptionApple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also provides digital content stores and streaming services; AppleCare support services; and iCloud, a cloud service, which stores music, photos, contacts, calendars, mail, documents, and others. It sells and delivers third-party applications for its products through the App Store, Mac App Store, and Watch App Store. Apple Inc. has a collaboration with Google to develop COVID-19 tracking system for Android and iOS devices.
Apple Inc. was founded in 1977 and is headquartered in Cupertino, California. While earnings are the driving metric behind stock prices, there wouldn't be any earnings to calculate if there weren't any sales to begin with. Like earnings, a higher growth rate is better than a lower growth rate. Seeing a company's projected sales growth instantly tells you what the outlook is for their products and services. As a point of reference, over the last 10 years, the median sales growth for the stocks in the S&P 500 was 14%.
Of course, different industries will have different growth rates that are considered good. So be sure to compare a stock to its industry's growth rate when sizing up stocks from different groups. Analysts and global investors are keeping a close watch on several areas in the company including upcoming holiday iPhone sales, AR and VR headsets, cash flows, stock buybacks among others.
Going into 2022, Apple is expected to remain a preferred mega-cap US stock to hold in one's portfolio and a top stock pick for 2022. Even if there are dips and corrections in the stock in the short to medium term, it may be used as an opportunity to add the shares in the long term portfolio. Overall, we remain neutral on Apple stock at current levels.
Apple's margins have also been trending higher, driven by a more favorable product mix and better economies of scale. Traditional preferred stock, trust preferred securities, third-party trust certificates, convertible securities, mandatory convertible securities and other exchange-traded equity and/or debt securities. Criteria and inputs entered, including the choice to make security comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity.
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This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.37% per year. These returns cover a period from January 1, 1988 through January 3, 2022.
Apple Stock Price Forecast Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations.
Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. Some investors seek out stocks with the best percentage price change over the last 52 weeks, expecting that momentum to continue.
Others look for those that have lagged the market, believing those are the ones ripe for the biggest increases to come. So what are the key trends that are likely to drive Apple's results? While Apple launched its latest iPhone 13 handsets in September, we don't expect the device to be a major driver of Apple's sales, as it was available for sale for just about a week in Q3.
However, it's possible that Apple could be seeing some pressure on device supply, due to the ongoing semiconductor shortage. Apple's margins are also likely to trend higher on a year-over-year basis, driven by a growing mix of services revenues, higher average prices on iPhones, and other devices. See our interactive dashboard analysis onApple Pre-Earningsfor more details. MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Cash is vital to a company in order to finance operations, invest in the business, pay expenses, etc.
Since cash can't be manipulated like earnings can, it's a preferred metric for analysts. Analyst sentiment, which gives a good sense of a stock's future price movement, is good for AAPL. It has an average broker rating of 1.51, indicating favorable analyst sentiment. Of38 Wall Street analysts that rated the stock, 11 rated it a "Strong Buy." The consensus EPS estimate of $0.88 for the quarter ending March 31, 2021 represents a 37.5% improvement year-over-year. Moreover, AAPL has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $73.15 billion for the next quarter represents a 25.4% increase from the same period last year.
The new iPhone 12 handsets saw their first full quarter of sales over Q2 FY'21, helping iPhone revenue rise 65% compared to last year. The iPhone is Apple's most profitable hardware product and the new handset is also priced at a premium compared to its predecessors, helping margins. For example, Apple says that it has about 660 million paid subscriptions on its platform now, marking an increase of 145 million compared to last year. Separately, Apple said that it also benefited from a favorable foreign exchange environment. Or is there an opportunity to expand the business' product line in the future?
If investors know Apple will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Apple listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Apple's financial performance, including its share price, relies heavily on the sales of its products. A high flier through much of its recent history, Apple stock hit new all-time highs toward the end of 2021, with a market capitalization approaching a record $3 trillion. Large companies beat collective market expectations of their earnings to positively influence their market capitalization. That they often manipulate their earnings reports to match or beat estimates to artificially enhance their stock prices is no accident.
As a result, the Securities and Exchange Commission intensely scrutinizes earnings management. 32 Wall Street research analysts have issued "buy," "hold," and "sell" ratings for Apple in the last year. There are currently 6 hold ratings, 24 buy ratings and 2 strong buy ratings for the stock. The consensus among Wall Street research analysts is that investors should "buy" Apple stock.
Apple is the 5th-largest economy in the world, he says without sarcasm. For a generation holding onto stocks longer than expected (because bonds don't pay like they used to ), Apple is the exact asset to replace fixed income. It has ridiculous free cash flow and boasts double-digit revenue growth and profit expansion. It's up 25% this quarter so far and up 8% this month so far. Yet all of these reasons are backwards looking and speak nothing to what will occur in the future.
I find it highly concerning that investors seem to be very enthusiastic about the fact that AAPL is reporting "record numbers," but it is instead the forward growth rate that will drive future returns. The fact that AAPL earned over $123 billion in revenues in the latest quarter is very impressive, but should not be a reason to be buying the stock at 28x forward earnings. While the F1 consensus estimate and revision is a key driver of stock prices, the Q1 consensus is an important item as well, especially over the short-term, and particularly as a stock approaches its earnings date.
If a stock's Q1 estimate revision decreases leading up to its earnings release, that's usually a negative sign, whereas an increase is typically a positive sign. Apple is clearly in a much better position to navigate the ongoing headwinds compared to other smartphone players. Apple is the most profitable company in the smartphone space by far, with gross margins standing at a solid 42% in Q4 FY'21.
This means the company should be in a better position to pay more to secure supply, compared to smaller players, without really impacting its profits. This could mean that Apple will see reasonable supply growth despite shortages. Demand should also hold up, as carrier promos for the new devices also appear attractive, as wireless carriers look to sign on customers for their recently built out 5G networks. Stronger momentum in the iPhone business is always a big catalyst for Apple stock, and this could be validated as Apple publishes Q1 FY'22 earnings. We track the performance of the top 100 financial experts across various large and mid-size financial boutiques.
