I am neutral on Apple (AAPL) as the company’s strong competitive position in its industry, robust profitability, and general support from Wall Street analysts is offset by its fairly high valuation multiples and slowing growth outlook.
Apple is an American-based multinational technology corporation specializing in consumer electronics, including computer software and online technology services. (See Analysts’ Top Stocks on TipRanks)
StrengthsApple is the biggest technology company in the world, based on revenue totaling $274.3 billion in 2020.
The company is the fourth-largest provider of personal computers by unit sales and the fourth-largest manufacturer of smartphones. It is also one of the largest companies in the world by virtually every metric.
Recent ResultsApple reported revenue of $83.36 billion in its fourth quarter of fiscal 2021. The quarter ended September 25 saw revenue up by 29% from the same quarter of the previous year; however, the company missed the expected earnings of $84.68 billion. Overall earnings were 41.24 per diluted share, which is in line with estimates.
The iPhone division saw revenue of $38.87 billion, which was less than the $41.60 billion expected. Mac revenue was reported at $9.18 billion, lower than the expected number of $9.30 billion. iPad revenue was $8.25 billion, which was considerably higher than the $7.16 billion expected.
The company also reported Service revenue of $18.28 billion that also beat the $17.57 billion estimate. The Wearable segment revenue was $8.79 billion versus expectations of $9.27 billion. Although the company missed analysts’ expectations on many divisions, overall quarterly revenue was up 29% year-over-year.
The company is well on its way to meeting its 2030 goal of becoming a carbon-neutral corporation and advancing its mission to create an equitable future.
The company’s fourth quarter showed strong growth in double digits, during which it set new revenue records in its product categories and geographic segments. Apple reported it was able to return $24 billion in total dividends to its shareholders as it continues to make progress towards reaching a net cash neutral position.
The company’s board of directors declared a cash dividend of $0.22 per common stock share, which was paid out on November 11.
Valuation MetricsApple’s stock looks richly valued at the moment as its EV/EBITDA ratio is currently 21.7x compared to its five-year average of 13.3x, and its P/E ratio is 28.4x compared to its five-year average of 20x.
While the multiples are high, the growth prospects are expected to slow moving forward as EBITDA is expected to decline by 0.2% in 2022 and grow by 4.5% in 2023, while normalized earnings per share are expected to grow by just 1.4% in 2022 and 7.2% in 2023.
Wall Street’s TakeFrom Wall Street analysts, Apple earns a Moderate Buy analyst consensus based on 21 Buy ratings, six Hold ratings, and one Sell rating in the past three months. Additionally, the average Apple price target of $166.92 puts the upside potential at 3.1%.
Summary and ConclusionsApple has an extremely valuable brand and generates very strong profitability. The company’s moat is also clearly strong as it enjoys a very sticky customer base, and its balance sheet is also stellar.
That said, upside in the shares from here appears limited as growth is expected to grow substantially over the next few years even as valuation multiples are well above historical averages.
Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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Apple (AAPL) stock saw out last week notching a new all-time high whilst reclaiming top spot as the world’s most valuable company by market cap.
These milestones can be attributed to two words which when put together in the current climate have the instant ability to add value to any company: electric vehicle (EV). Or in Apple’s case of course, the Apple Car.
A Bloomberg article stated that the company is closer than previously expected to possess the tech needed to manufacture an autonomous vehicle, which could potentially hit the road by 2025.
Such a target is not necessarily a surprise to Wedbush analyst Daniel Ives, which thinks a 2024-2025 debut is likely.
“We continue to believe it's a matter of when, not if, Apple enters the EV race and this will add another $30+ per share of TAM to the Apple growth story over the next few years given the golden age of EV transformation on the horizon,” the 5-star analyst said.
Ives thinks the car will be the product of a partnership which Apple is likely to announce next year. The analyst says the company has spent several years working on its “autonomous vision” and expects an “established auto player” to partner with the tech giant initially in what would amount to a “golden partnership” in the EV space. Who’s eligible for this coveted slot? Ives counts Hyundai, Tesla, GM, Ford, or VW as possible partners.
Given the “margin and financial model implications” ahead, not to mention the “gargantuan” endeavour’s element of risk, Ives thinks Apple would be wise to have a partner to share this drive down the EV path.
All in all, Ives rates AAPL shares an Outperform (i.e. Buy) along with a $185 price target. This gives the stock ~15% upside potential. (To watch Ives’ track record, click here)
The Street’s average target is a more muted $166.92, implying just modest 3.5% growth over the coming months. Most analysts are still in Apple’s corner, but not all are on board right now; the stock’s Moderate Buy consensus rating is based on 21 Buys vs. 6 Holds and 1 Sell. (See Apple stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Apple (AAPL) has filed a lawsuit against NSO Group for illegally installing its spyware product, Pegasus, on some Apple devices. The tech giant also disclosed that none of its servers was hacked, or compromised, in the cyberattacks.
The exploit was first identified by the Citizen Lab, a research group at the University of Toronto. It is alleged that NSO Group created Apple IDs to transfer malicious data and install Pegasus on victims' devices without their knowledge. With this transfer, NSO Group was able to access the microphone, camera and other sensitive data on the Apple devices. (See Apple stock charts on TipRanks)
Apple has assured its clients, who have iPhones with iOS 15 and later versions, that no evidence of successful remote attacks on the devices has been found. Also, it added that the company continued to update its security protections.
The Head of Apple Security Engineering and Architecture, Ivan Krstić, said, “Our threat intelligence and engineering teams work around the clock to analyse new threats, rapidly patch vulnerabilities, and develop industry-leading new protections in our software and silicon. Apple runs one of the most sophisticated security engineering operations in the world, and we will continue to work tirelessly to protect our users from abusive state-sponsored actors like NSO Group.”
Redressal DemandedApple seeks to have a ban placed on NSO Group to stop it from impacting individuals through Apple’s products and services. Also, it demands redress for violations of US federal and state law, arising out of its efforts to target and attack Apple and its users.
Apple’s Efforts to Counter AttacksThe company has announced plans to invest $10 million and pay any damages from the lawsuit to organizations pursuing cybersurveillance research and advocacy. Also, it has extended its support to groups like the Citizen Lab and Amnesty Tech for their efforts to help identify such attacks.
Moreover, Apple will be extending pro-bono technical, threat intelligence, and engineering assistance to support the Citizen Lab’s independent research mission.
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Stock RatingRecently, Wells Fargo analyst Aaron Rakers maintained a Buy rating on Apple with a price target of $165 (2.2% upside potential from current level).
The China Academy of Information and Communications Technology released data for mobile phone shipment and non-China branded mobile phone shipments in October, up 85% year-over-year. Based on this information, Rakers is of the opinion that the implied non-China branded mobile phone shipments can be a positive derivative data point for Apple's iPhone.
The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 21 Buys, 6 Holds and 1 Sell. The average Apple price target of $166.92 implies 3.4% upside potential.
Website TrafficTipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Apple’s performance.
According to the tool, Apple’s website recorded a 6.3% monthly decline, year-over-year, in global unique visits in October. Meanwhile, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at 9.2%.
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