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Welcome to Episode #379 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey is going solo to talk about Apple. As many long-time listeners of the podcast know, Tracey is not an Apple investor. Nor does she use its products. That’s right. She does not own an iPhone, and never has.
But after Apple reported the fourth straight quarterly sales decline, the first time it has done so since 2001, Tracey decided to look at Apple’s sales and earnings estimates.
Apple has been one of the best performing stocks of the last 20 years. As of Sep 2023, $10,000 invested 20 years ago, with dividends reinvested, was worth $5.08 million. And it keeps hitting new all-time highs.
But is the 20-year bull market in the stock about to end?
Apple went public in 1980. It’s been a wild ride. In the 1990s, it was just 30 days away from bankruptcy before it got a bailout from Bill Gates and Microsoft. Apple went on to make some of the most iconic products of the century including the iPod, the iPad and, of course, the iPhone.
But in fiscal 2023, growth slowed. In the fourth quarter, iPhone sales only rose 2.8% year-over-year.
Apple’s revenue is expected to rise just 3.1% in fiscal 2024 with earnings growing 6.7%. That might be fine if the stock was cheap, but it’s not. Apple trades with a forward P/E of 27.4 and a P/S ratio of 7.3.
What valuation are you willing to pay for Apple’s single digit growth?
SONY is not a stranger to having iconic products. In 1979, it launched a new handheld cassette player it called the “Walkman.” By 1999, SONY had sold 186 million of the Walkmans and the name “Walkman” became synonymous with ANY handheld cassette player with earphones.
Ultimately, the iPod and other MP3 players led to the Walkman’s demise. But SONY has plenty of other divisions, including gaming, music, cameras, and entertainment, to make up for it.
SONY’s growth has also slowed. It is expected to see revenue fall 1.4% in fiscal 2024 and earnings to gain just 1.3%. But it’s valuation is also much cheaper. SONY trades with a forward P/E of just 15.7. It’s P/S ratio is only 1.3.
IBM was the dominant technology company of the 1960s and 70s. At one point, it produced 80% of computers in the United States. But by 2005, it had exited the PC business altogether.
IBM’s growth has also slowed. In 2023, it’s expected to grow revenue by just 1.1% and earnings by 3.3%. However, like SONY, it also has attractive valuations. IBM trades with a forward P/E of just 15.8 and a P/S ratio of 2.2.
But it’s the juicy dividend, currently yielding 4.5%, that attracts a lot of investors.
Should income investors have IBM on their short list?
What Else do you Need to Know About Apple?
Tune into this week’s podcast to find out.
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Is Apple's Magic Fading?
Welcome to Episode #379 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey is going solo to talk about Apple. As many long-time listeners of the podcast know, Tracey is not an Apple investor. Nor does she use its products. That’s right. She does not own an iPhone, and never has.
But after Apple reported the fourth straight quarterly sales decline, the first time it has done so since 2001, Tracey decided to look at Apple’s sales and earnings estimates.
Apple has been one of the best performing stocks of the last 20 years. As of Sep 2023, $10,000 invested 20 years ago, with dividends reinvested, was worth $5.08 million. And it keeps hitting new all-time highs.
But is the 20-year bull market in the stock about to end?
What Happens When Tech Growth Slows
1. Apple Inc. (AAPL - Free Report)
Apple went public in 1980. It’s been a wild ride. In the 1990s, it was just 30 days away from bankruptcy before it got a bailout from Bill Gates and Microsoft. Apple went on to make some of the most iconic products of the century including the iPod, the iPad and, of course, the iPhone.
But in fiscal 2023, growth slowed. In the fourth quarter, iPhone sales only rose 2.8% year-over-year.
Apple’s revenue is expected to rise just 3.1% in fiscal 2024 with earnings growing 6.7%. That might be fine if the stock was cheap, but it’s not. Apple trades with a forward P/E of 27.4 and a P/S ratio of 7.3.
What valuation are you willing to pay for Apple’s single digit growth?
2. SONY Corp. (SONY - Free Report)
SONY is not a stranger to having iconic products. In 1979, it launched a new handheld cassette player it called the “Walkman.” By 1999, SONY had sold 186 million of the Walkmans and the name “Walkman” became synonymous with ANY handheld cassette player with earphones.
Ultimately, the iPod and other MP3 players led to the Walkman’s demise. But SONY has plenty of other divisions, including gaming, music, cameras, and entertainment, to make up for it.
SONY’s growth has also slowed. It is expected to see revenue fall 1.4% in fiscal 2024 and earnings to gain just 1.3%. But it’s valuation is also much cheaper. SONY trades with a forward P/E of just 15.7. It’s P/S ratio is only 1.3.
Is this a buying opportunity in SONY?
3. IBM Corp. (IBM - Free Report)
IBM was the dominant technology company of the 1960s and 70s. At one point, it produced 80% of computers in the United States. But by 2005, it had exited the PC business altogether.
IBM’s growth has also slowed. In 2023, it’s expected to grow revenue by just 1.1% and earnings by 3.3%. However, like SONY, it also has attractive valuations. IBM trades with a forward P/E of just 15.8 and a P/S ratio of 2.2.
But it’s the juicy dividend, currently yielding 4.5%, that attracts a lot of investors.
Should income investors have IBM on their short list?
What Else do you Need to Know About Apple?
Tune into this week’s podcast to find out.