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Apple ((AAPL - Free Report) ) stock ended 2023 and started 2024 on a downbeat note as some analysts raced to outsmart themselves with various downgrades of the iPhone maker based on concerns about slowing growth in China and other headwinds.
Yet, Apple is up around 8% since January 5 and approaching its mid-December records heading into its Q1 FY24 earnings release on February 1. Apple’s recent wave of upward earnings revisions help AAPL earn a Zacks Rank #1 (Strong Buy).
Apple is certainly no hidden gem, but who cares? The moral of our story today is that it pays to keep it simple and buy shares of one of the true Wall Street titans as part of a healthy, well-rounded portfolio.
Apple is far more than an iPhone maker these days. Plus, AAPL is trading above all of its key short-term and long-term moving averages.
Recent Negativity
A few notable analysts downgraded Apple stock over the last month or so. Their concerns focused on slowing iPhone sales, with a particular focus on China, among wider fears about an increasingly saturated high-end smartphone market. There are also constant worries about legal battles regarding its App Store and more.
Apple is facing mounting competition from rival Huawei Technologies in the world’s second largest economy. AAPL is also suffering setbacks in the Chinese market, as are many other companies across various industries, due to the broad-based economic slowdown in China. Geopolitical fears play their part as well.
Image Source: Zacks Investment Research
AAPL’s overall sales declined YoY during the trailing four quarters, with total FY23 revenue down 2.8% (its third YoY decline in the last eight years).
Despite the mounting concerns about Apple’s business in China and its economy more broadly, AAPL’s revenue in China only slipped by roughly 2.2% in fiscal 2023 (vs. Apple’s wider 2.8% drop). Apple’s total iPhone revenue fell by over 2% last year, and smartphone sales climbed by 2.8% in the fourth quarter.
The iPhone and Beyond
Apple’s branding power remains nearly unmatched and its constant cycles of new phones and devices keep people wanting more. Many consumers upgrade to new iPhones and other devices habitually, even if there isn’t a game-changing difference, and would never think of leaving the Apple universe.
Apple sold $200 billion worth of iPhones in FY23 up from $142 billion in FY19. Apple’s long-term growth case is not difficult to make in a world full of smartphone addicts, especially as its subscriptions grow within its key services unit.
Chief executive Tim Cook has focused on transforming Apple beyond an iPhone maker by continually making money from its loyal and growing customer base. Apple’s services segment climbed by 9% in FY23 to account for 22% of sales, making it by far the biggest segment outside of iPhone.
Image Source: Zacks Investment Research
Apple said last quarter that it had an installed base of “over 2 billion active devices,” which “continues to grow at a nice pace.” AAPL’s services efforts go beyond its App Store and include Netflix and Spotify competitors, a subscription news offering, Apple Wallet, a video game platform, digital workout classes, and more.
AAPL finished its most recent period with “over 1 billion paid subscriptions across” its services, marking nearly double the number it had three years ago. On top of that, Apple has brought more of its chips in-house and it is quietly spending heavily on rolling out AI features in its smartphones and other devices.
Near-Term Outlook
Taiwan Semiconductor Manufacturing Company ((TSM - Free Report) ) reported upbeat results on January 18 and provided strong guidance that signals a return to growth for the smartphone market. Apple’s revenue is projected to climb by 3% in FY24 and jump 6% higher in FY25 to reach $418.36 billion vs. $383.29 billion in FY23.
Meanwhile, its adjusted earnings are projected to grow by 8% in FY24 and another 9% higher next year to come in at $7.19 per share. This would come on top of marginal EPS growth last year.
Image Source: Zacks Investment Research
Apple has topped earnings every period over the last five years outside of a small miss in the first quarter of FY23.
Better yet, Apple’s earnings revisions have trended higher over the last month for FY24 and FY25, with its most accurate/most recent estimates solidly above the already-improved consensus. The bottom line positivity helps it capture a Zacks Rank #1 (Strong Buy) right now.
Performance, Technical Levels & Valuation
AAPL stock is up around 8% since January 5 and it trades 6% below its average Zacks price target and around 2% under its mid-December records. The rebound took Apple back above its 50-day and 21-day moving averages and from oversold RSI levels to above neutral.
Apple shares have climbed by roughly 1,000% in the last 10 years to top Microsoft ((MSFT - Free Report) ) and blow away the Zacks Tech sector’s 275% run. Apple is only up 36% in the past three years vs. Microsoft’s 75%.
AAPL has also underperformed Tech during the last 12 months, which means it might be less overheated than some might assume.
Image Source: Zacks Investment Research
Apple is currently trading above its very long-term 21-month moving average and it appears far from overheated by historical RSI standards.
Valuation-wise, Apple trades at a roughly 20% discount to its five-year highs at 28.8X forward 12-month earnings and not too far above its median or Tech.
Bottom Line
Apple returned $25 billion to shareholders last quarter via buybacks and dividends. The firm is also still investing heavily in future growth endeavors such as artificial intelligence, EVs, and beyond.
Some investors might decide they would rather attempt to find the next Apple. But sometimes betting on the favorite works better than going with the underdog.
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Bull of the Day: Apple (AAPL)
Apple ((AAPL - Free Report) ) stock ended 2023 and started 2024 on a downbeat note as some analysts raced to outsmart themselves with various downgrades of the iPhone maker based on concerns about slowing growth in China and other headwinds.
Yet, Apple is up around 8% since January 5 and approaching its mid-December records heading into its Q1 FY24 earnings release on February 1. Apple’s recent wave of upward earnings revisions help AAPL earn a Zacks Rank #1 (Strong Buy).
Apple is certainly no hidden gem, but who cares? The moral of our story today is that it pays to keep it simple and buy shares of one of the true Wall Street titans as part of a healthy, well-rounded portfolio.
Apple is far more than an iPhone maker these days. Plus, AAPL is trading above all of its key short-term and long-term moving averages.
Recent Negativity
A few notable analysts downgraded Apple stock over the last month or so. Their concerns focused on slowing iPhone sales, with a particular focus on China, among wider fears about an increasingly saturated high-end smartphone market. There are also constant worries about legal battles regarding its App Store and more.
Apple is facing mounting competition from rival Huawei Technologies in the world’s second largest economy. AAPL is also suffering setbacks in the Chinese market, as are many other companies across various industries, due to the broad-based economic slowdown in China. Geopolitical fears play their part as well.
Image Source: Zacks Investment Research
AAPL’s overall sales declined YoY during the trailing four quarters, with total FY23 revenue down 2.8% (its third YoY decline in the last eight years).
Despite the mounting concerns about Apple’s business in China and its economy more broadly, AAPL’s revenue in China only slipped by roughly 2.2% in fiscal 2023 (vs. Apple’s wider 2.8% drop). Apple’s total iPhone revenue fell by over 2% last year, and smartphone sales climbed by 2.8% in the fourth quarter.
The iPhone and Beyond
Apple’s branding power remains nearly unmatched and its constant cycles of new phones and devices keep people wanting more. Many consumers upgrade to new iPhones and other devices habitually, even if there isn’t a game-changing difference, and would never think of leaving the Apple universe.
Apple sold $200 billion worth of iPhones in FY23 up from $142 billion in FY19. Apple’s long-term growth case is not difficult to make in a world full of smartphone addicts, especially as its subscriptions grow within its key services unit.
Chief executive Tim Cook has focused on transforming Apple beyond an iPhone maker by continually making money from its loyal and growing customer base. Apple’s services segment climbed by 9% in FY23 to account for 22% of sales, making it by far the biggest segment outside of iPhone.
Image Source: Zacks Investment Research
Apple said last quarter that it had an installed base of “over 2 billion active devices,” which “continues to grow at a nice pace.” AAPL’s services efforts go beyond its App Store and include Netflix and Spotify competitors, a subscription news offering, Apple Wallet, a video game platform, digital workout classes, and more.
AAPL finished its most recent period with “over 1 billion paid subscriptions across” its services, marking nearly double the number it had three years ago. On top of that, Apple has brought more of its chips in-house and it is quietly spending heavily on rolling out AI features in its smartphones and other devices.
Near-Term Outlook
Taiwan Semiconductor Manufacturing Company ((TSM - Free Report) ) reported upbeat results on January 18 and provided strong guidance that signals a return to growth for the smartphone market. Apple’s revenue is projected to climb by 3% in FY24 and jump 6% higher in FY25 to reach $418.36 billion vs. $383.29 billion in FY23.
Meanwhile, its adjusted earnings are projected to grow by 8% in FY24 and another 9% higher next year to come in at $7.19 per share. This would come on top of marginal EPS growth last year.
Image Source: Zacks Investment Research
Apple has topped earnings every period over the last five years outside of a small miss in the first quarter of FY23.
Better yet, Apple’s earnings revisions have trended higher over the last month for FY24 and FY25, with its most accurate/most recent estimates solidly above the already-improved consensus. The bottom line positivity helps it capture a Zacks Rank #1 (Strong Buy) right now.
Performance, Technical Levels & Valuation
AAPL stock is up around 8% since January 5 and it trades 6% below its average Zacks price target and around 2% under its mid-December records. The rebound took Apple back above its 50-day and 21-day moving averages and from oversold RSI levels to above neutral.
Apple shares have climbed by roughly 1,000% in the last 10 years to top Microsoft ((MSFT - Free Report) ) and blow away the Zacks Tech sector’s 275% run. Apple is only up 36% in the past three years vs. Microsoft’s 75%.
AAPL has also underperformed Tech during the last 12 months, which means it might be less overheated than some might assume.
Image Source: Zacks Investment Research
Apple is currently trading above its very long-term 21-month moving average and it appears far from overheated by historical RSI standards.
Valuation-wise, Apple trades at a roughly 20% discount to its five-year highs at 28.8X forward 12-month earnings and not too far above its median or Tech.
Bottom Line
Apple returned $25 billion to shareholders last quarter via buybacks and dividends. The firm is also still investing heavily in future growth endeavors such as artificial intelligence, EVs, and beyond.
Some investors might decide they would rather attempt to find the next Apple. But sometimes betting on the favorite works better than going with the underdog.