Should You Really Buy Apple Stock? The Motley Fool

It’s now operating in several new areas, which don’t have the high overheads of hardware and its restrictive supply chains. Apple currently has a price-to-earnings ratio (P/E ratio) of 27. But I wouldn’t be surprised if artificial intelligence (AI) is Apple’s next game changer. The company hasn’t been in the AI limelight as some have this year.

What you have to believe to justify the high valuation that the market is placing on Apple’s stock. Also look for low or no commissions, excellent customer service, and tools and resources to help with your investing journey. With research-backed reasons and portfolio analysis supporting your decision to buy Apple stock, it may be tempting to assume the amount you could buy is the amount you should buy. At more than $100 per share, Apple stock may appear to be cheap—especially compared to its value of almost $500 per share in August 2020.

Apple’s management has consistently demonstrated its execution prowess over the years, and Cook rarely has disappointed. Therefore, we believe that AAPL will find a way to manage an adverse impact on its production if any. We see any potential “thrashing” of AAPL stock price as an opportunity to add long-term exposure if that happens. The tech giant started out operating from the Jobs’ family garage and has since grown into a diversified technology behemoth.

Growth Scorecard

The Relative Strength Rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks. In the June quarter, Apple’s iPhone revenue declined 2% to $39.67 billion and accounted for 48% of the company’s total sales. Apple earned $1.26 a share on sales of $81.8 billion for the quarter ended July 1. Analysts polled by FactSet had expected Apple earnings of $1.20 a share on sales of $81.8 billion.

The 1 Week Price Change displays the percentage price change over the last 5 trading days using the most recently completed close to the close from 5 days before. While the hover-quote on Zacks.com, as well as the various tables, displays the delayed intraday quote and price change, this display shows the daily change as of the most recently completed trading day. This is useful for obvious reasons, but can also put the current day’s intraday gains into better context by knowing if the recently completed trading day was up or down. The Price to Sales ratio or P/S is calculated as price divided by sales. After the P/E ratio, it’s one of the most common valuation metrics.

At the end of the most recent quarter, the company had $193 billion in cash on hand. Even when you account for the company’s debt, Apple still had $73 billion left over. You will have no right to complain to the Financial Ombudsman Services or to seek compensation from the Financial Services Compensation Scheme. All investments can fall as well as rise in value so you could lose some or all of your investment. Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

Best Dow Jones Stocks To Buy And Watch In September 2023: Apple Extends Sell-Off

Zacks’ proprietary data indicates that Apple Inc. is currently rated as a Zacks Rank 3 and we are expecting an inline return from the AAPL shares relative to the market in the next few months. In addition, Apple Inc. has a VGM Score of C (this is a weighted average of the individual Style Scores which allow you to focus on the stocks that best fit your personal trading style). Its Value Score of D 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. Some investors seek out stocks with the best percentage price change over the last 52 weeks, expecting that momentum to continue.

That does not mean that all companies with large growth rates will have a favorable Growth Score. But, typically, an aggressive growth trader will be interested in the higher growth rates. Projected EPS Growth looks at the estimated growth rate for one year. It takes the consensus estimate for the current fiscal year (F1) divided by the EPS for the last completed fiscal year (F0) (actual if reported, the consensus if not). A higher number means the company has more debt to equity, whereas a lower number means it has less debt to equity.

Apple Inc.: Should You Invest in Apple Stock?

This time period essentially shows you how the consensus estimate has changed from the time of their last earnings report. Ideally, an investor would like to see a positive EPS change percentage in all periods, i.e., 1 week, 4 weeks, and 12 weeks. Many investors prefer EV to just Market Cap as a better way to determine the value of a company. EBITDA, as the acronym depicts, is earnings before interest, taxes, depreciation and amortization. That means these items are added back into the net income to produce this earnings number.

• I think that the stock could pull back further over the short term because of the aforementioned issues.
• As for iPhones in particular, the company sold 40.4 million units, which beat expectations of 39.9 million units.
• The previous split occurred on February 28, 2005 at two-for-one.
• In 2024, it plans to launch a new virtual reality (VR) headset, the Apple Vision Pro.
• As a result, investors such as Warren Buffett have heartily vouched for the tech manufacturer, consigning 41% of Berkshire Hathaway’s portfolio to Apple.

By way of comparison, Apple’s operating margin has not reached that level since 2018. As a result, consensus EPS for the next three years is $4.42, $4.65, and $4.89, which based on the current price results in forward P/E ratios of 29.6 times, 28.2 times, and 26.8 times. Apple Earnings Will Surge in 2021, but Don’t Expect It to Last In our base-case scenario, we project that revenue will leap by 16% in 2021. Apple’s main revenue driver is the iPhone, which constitutes more than half of the company’s sales. We’re forecasting iPhone revenue will increase by 19%, consisting of a 15% increase in unit sales and nearly 4% increase in the average selling price. We consistently rely on our discounted cash flow model, as compared with many street analysts who slap on ever-higher multiples in order to justify chasing the stock higher.

What about Apple’s stock price?

Meanwhile, AirPod Pros will soon automatically turn off noise canceling once the wearer engages in a conversation. In Q3, the company spent $23 billion on research and development, an increase of about $3 billion from the previous year. CEO Tim Cook revealed in an earnings call that the rise is primarily due to its growing venture in generative AI. The company has reportedly built a custom framework for creating large language models and developed a platform similar to OpenAI’s ChatGPT, which engineers have nicknamed Apple GPT. Therefore, it has made possible the development of its latest M1 Ultra SoC, which Apple introduced in its latest Mac Studio product.

• My personal view is that Apple stock remains a buy, albeit not as compelling of one as it’s been in the past.
• In Q3, the company spent $23 billion on research and development, an increase of about $3 billion from the previous year.
• Yet, without a paradigm shift in the company’s business profile, these assumptions appear unlikely.
• The Relative Strength Rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.

The hedge fund Simon founded increased its position in Apple by more than 514x during Q2. To find the best stocks to buy and watch, check out IBD’s Stock Lists page. More stock ideas can be found on IBD’s Leaderboard, MarketSmith and SwingTrader platforms. Apple has an installed base of more than 2 billion devices in use today, including well over 1 billion iPhones.

Apple’s Weaknesses

Some of the items you’ll see in this category might look very familiar, while other items might be quite new to some. The industry with the best average Zacks Rank would be considered the https://1investing.in/ top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.

But is Apple’s stock a “Buy” now and what is the Apple stock forecast? Investors want to believe in a comeback and they are apparently willing to forego reality checks. They were willing to muster a bullish response even as Apple sales—when it comes down to it—simply proved they were dropping. Revenue dropped 15%, but at $42.4 billion, the company managed to keep its revenue above the expected $42.1 billion thanks to higher-than-expected “iPhone” sales. As for iPhones in particular, the company sold 40.4 million units, which beat expectations of 39.9 million units. If the market turns south, don’t try to fight the general stock market direction.

The Apple share price is trading around $167, which is down 8% from its 52-week high and up 29% from its 52-week low. It’s one of the most valuable companies in the world, with a market cap of $2.7 trillion. Then there’s the uncertainty 14 digit account number in China, which recently banned government officials from using iPhones. Should the country take further steps against Apple, it would be very problematic. The company generated nearly 20% of its total revenue in China last year.

So, when comparing one stock to another in a different industry, it’s best make relative comparisons to that stock’s respective industry values. You can also look at factors such as Apple’s price-to-earnings ratio (called a PE ratio) and its dividend yield and growth rate, especially if Apple’s dividend is part of why the stock appeals to you. For reference, the company recently announced a cash dividend of $0.24 per share of Apple’s common stock, payable to those who were shareholders as of May 15, 2023. You can find a stock’s P/E ratio by dividing the stock’s share price by its earnings per share (EPS).

Overall, it’s safe to say that Apple’s stock is not cheap, but no one can fault an investor willing to pay a premium price for a quality business. For the value-conscious investor, it may be prudent to wait for a pullback in the price before accumulating shares. Over the last decade, Apple’s products and services have worked together to deliver impressive revenue and profit growth. Revenue has increased from $157 billion in 2012 to $366 billion in 2021.