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Should You Buy Apple (AAPL) Stock Ahead of Q3 Earnings
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Apple (AAPL - Free Report) is slated to release its next quarterly earnings report next Tuesday. The technology giant’s sales growth has slowed down considerably, but that doesn’t take away from the fact that it still generates a very high level of cash flows. The company’s shares have picked up some steam recently, but they are still trading at a 25% discount compared to all-time highs. With all this in mind, should you buy AAPL stock ahead of earnings?
Apple looks like a solid candidate for the long run, and fundamental value metrics suggest that the stock is relatively cheap right now. It trades at a forward PE of 12.14, and its PEG is relatively tame at 1.25. While this is what you’d want to see from a bargain standpoint, it is important to factor in this year’s expected sales and earnings decline of -7.8% and -10.6% respectively. Apple’s sales have stagnated in China and other geographic areas where the company had hoped it would generate more sales growth from over the long term.
Apple has also struggled to diversify its revenues, and the company heavily relies on the iPhone to drive strong sales numbers. In the second quarter, iPhone revenues accounted for 65% of total sales. There is risk in this, but Apple is acquiring other companies and it is aggressively trying to expand its reach in the tech space. Apple’s products and services are all great with regards to satisfying consumers, and while it might be wise to bet on its performance in the long run, there are short term factors which stand to affect where its share price goes from here.
Earnings Expectations
Analysts have been revising their earnings expectations downwards for the current quarter, this year, and next year. Over the last two months, no analysts have revised their earnings outlook on Apple upwards. Eight analysts have revised their EPS expectations downwards for the current quarter, and two of those analysts have updated their estimates as recently as seven days ago.
The recent revisions suggest that new information has been implemented into the forecasts, and the new data could end up making Apple’s earnings lower than the figures our current consensus estimate calls for. Over the last 90 days, our EPS consensus has dropped from $1.69 to $1.39. This represents an 18% reduction compared to our estimate three months ago. The negative earnings momentum for Apple makes it look like an unattractive purchase right now, and this is why it is a Zacks Rank #4 (Sell). Buying now doesn’t look like a sure thing because there is a significant chance of the company missing earnings expectations for the second straight quarter.
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Should You Buy Apple (AAPL) Stock Ahead of Q3 Earnings
Apple (AAPL - Free Report) is slated to release its next quarterly earnings report next Tuesday. The technology giant’s sales growth has slowed down considerably, but that doesn’t take away from the fact that it still generates a very high level of cash flows. The company’s shares have picked up some steam recently, but they are still trading at a 25% discount compared to all-time highs. With all this in mind, should you buy AAPL stock ahead of earnings?
Apple looks like a solid candidate for the long run, and fundamental value metrics suggest that the stock is relatively cheap right now. It trades at a forward PE of 12.14, and its PEG is relatively tame at 1.25. While this is what you’d want to see from a bargain standpoint, it is important to factor in this year’s expected sales and earnings decline of -7.8% and -10.6% respectively. Apple’s sales have stagnated in China and other geographic areas where the company had hoped it would generate more sales growth from over the long term.
Apple has also struggled to diversify its revenues, and the company heavily relies on the iPhone to drive strong sales numbers. In the second quarter, iPhone revenues accounted for 65% of total sales. There is risk in this, but Apple is acquiring other companies and it is aggressively trying to expand its reach in the tech space. Apple’s products and services are all great with regards to satisfying consumers, and while it might be wise to bet on its performance in the long run, there are short term factors which stand to affect where its share price goes from here.
Earnings Expectations
Analysts have been revising their earnings expectations downwards for the current quarter, this year, and next year. Over the last two months, no analysts have revised their earnings outlook on Apple upwards. Eight analysts have revised their EPS expectations downwards for the current quarter, and two of those analysts have updated their estimates as recently as seven days ago.
The recent revisions suggest that new information has been implemented into the forecasts, and the new data could end up making Apple’s earnings lower than the figures our current consensus estimate calls for. Over the last 90 days, our EPS consensus has dropped from $1.69 to $1.39. This represents an 18% reduction compared to our estimate three months ago. The negative earnings momentum for Apple makes it look like an unattractive purchase right now, and this is why it is a Zacks Rank #4 (Sell). Buying now doesn’t look like a sure thing because there is a significant chance of the company missing earnings expectations for the second straight quarter.
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 25% per year for the last 29 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>