Apple (AAPL - Free Report) shares jumped over 1.1% Thursday on the back of a continued wave of positive news, including a Bank of America (BAC - Free Report) upgrade, bullish Cowen coverage, services strength, and much more. This begs the question: is now the time to buy Apple stock?
Cowen initiated coverage of AAPL stock with an “outperform” rating and a $220 price target. This marked 21% upside to Apple’s closing price of $181.71 per share on Wednesday. Analysts cited services growth and the iPhone’s ability to serve “as an annuity,” among other reasons. “We view the Services business as an investable long-term theme as EPS contributions can double to $6 by fiscal year 2021, and increasing recurring revenues should drive a higher multiple,” analyst Krish Sankar wrote in a note to clients.
Looking ahead, Cowen predicts that Apple will be able to more effectively monetize its install base, which Apple said hit 1.3 billion globally last quarter. Cowen thinks that Apple will be able charge “for value added options (possibly including Siri) down the road.”
Meanwhile, Apple on Thursday announced that it is set to host its now annual Worldwide Developers Conference in early June. The iPhone giant normally uses the week-long conference to show off its latest software. This time around the company is projected to unveil iOS13 for the iPhone and the iPad. Apple is also expected to reveal macOS 10.15, tvOS 13, and watchOS 6.
More Analyst Positivity
Moving on, Morgan Stanley (MS - Free Report) analyst Katy Huberty said the firm sees signs that iPhone sales in China could be headed toward stabilization. The analyst noted that Apple gained market share of the installed smartphone base in the world’s second-largest economy in January and February, after a decline in December.
The Morgan Stanley analyst also reiterated her $197 stock price target and “overweight” rating. “Second, February was the first month in half a year that our Asia team didn't revise iPhone builds lower..., implying the most significant supply chain cuts are likely behind us,” Huberty wrote in a note to clients.
Investors should also note that Bank of America analyst Wamsi Mohan upgraded Apple stock from “neutral” to “buy” on Monday, citing pullback-based opportunities and more. Plus, the analyst upped Apple’s 12-month price target from $180 a share to $210 per share.
AAPL stock had popped 1.10% through late-afternoon trading Thursday to hit $183.69 a share. This still represented a roughly 21% downturn from Apple’s 52-week high of $233.47 per share. And, as we mentioned at the top, shares of Apple have popped roughly 8% during the last week, including Thursday’s gains.
Apple stock plummeted to end 2018 and fell even further earlier this year on the back of slowing iPhone growth and Chinese-based worries. However, CEO Tim Cook’s company is set to expand beyond its core business.
Apple and Goldman Sachs (GS - Free Report) are reportedly set to offer a credit card that pairs with an iPhone app that aims to help users manage their money. The move is part of Apple’s larger financial tech ambitions that include Apple Pay and could end up growing as Square (SQ - Free Report) , PayPal (PYPL - Free Report) , and others try to shake up the credit card and banking industry.
Apple is also set to introduce its streaming TV service in 2019. The company is said to have spent over $1 billion on original content in order to compete against Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , Disney (DIS - Free Report) , AT&T (T - Free Report) , and others. Plus, Cook is committed to expanding his company’s Watch-style health offerings, which he thinks will play a valuable role down the road.
Outlook & Earnings Trends
Looking ahead, Apple’s Q2 fiscal 2019 revenue is projected to sink 5.8% to reach $57.60 billion, based on our current Zacks Consensus Estimate. Last quarter, overall revenue fell 4.5%, driven by a 15% drop off in iPhone sales. Q2 iPhone revenue is projected to tumble roughly 20% from $38.03 billion in the year-ago period to $30.57 billion, based on our current NFM estimate.
Jumping further ahead, Apple’s full-year 2019 revenue is expected to dip 4.2%. Investors should also note that the company’s fiscal 2020 revenue is projected to pop 3.1% above our 2019 estimate, which would still come in below 2018’s $265.60 billion.
Meanwhile, at the bottom end of the income statement, Apple’s adjusted Q2 earnings are projected to fall 12.8%. On top of that, AAPL’s full-year 2019 EPS figure is expected to dip 4.4%. The company’s adjusted 2020 earnings are projected to climb nearly 12% above our 2019 estimate. But Apple’s earnings estimate revision activity has trended in the wrong direction.
Apple is currently a Zacks Rank #3 (Hold) and clearly faces some tough times ahead. With that said, Apple is one of the largest companies in the world, with a ton of cash on hand and also pays a divided. These are some of the reasons that Cowen analysts view Apple somewhat like a safe bond at the moment.
Let’s not forget that Apple stock is trading at 15X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared to the S&P 500’s 16.7X and its own three-year high of 19.7X—it also hovers just above its three-year median of 14.4X.
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