The company’s fiscal third-quarter results, released last week, are arguably a game changer, making the stock a better long-term bet than it seemed to be before the earnings report. Apple’s current share price divided by its per-share earnings (EPS) over a 12-month period gives a “trailing price/earnings ratio” of roughly 28x. In other words, Apple shares trade at around 28x recent earnings. Then, in Q3 2023, services revenue growth hit 8% year over year, expanding more than any other part of Apple’s business.
When comparing offers or services, verify relevant information with the institution or provider’s site. However, stock declines across the market suggest decreasing excitement for tech in general. The growth potential for industries like artificial intelligence How to Make Money in Stocks (AI) and virtual/augmented reality (VR/AR) sent many stocks skyrocketing in the first half of 2023. It’s rarely a bad idea to consider buying Apple’s (AAPL 0.30%) stock. Shares have soared 217% in the last five years and 900% over the last decade.
Among them are Apple News (subscription news), Apple TV+ (subscription TV with original content), Apple Card (consumer credit card), and Apple Pay (mobile cashless pay feature). MarketRank is calculated as an average of available category scores, How to read forex charts with extra weight given to analysis and valuation. Investors will probably have to wait for the next quarterly report to see the results. Nonetheless, the move to 5G will likely spur further iPhone purchases, particularly in China.
Is iShares Core S&P U.S. Growth ETF (IUSG) a Strong ETF Right Now?
This comes at a time when the multiple has reached a multi-year high and could point to multiple compressions in the near future. Amid sales of the iPhone and other products, Apple remains a long-term buy. However, new investors may want to wait for the valuation to fall further before adding positions. This means that to achieve double returns, the market cap will have to rise to at least $4 trillion.
- Apple’s stock has a history of consistent growth over the long term, making it an attractive option at almost any time.
- The company has built a reputation for reliability with investors, allowing its stock to outperform its peers no matter the market conditions.
- Investors will probably have to wait for the next quarterly report to see the results.
- Apple’s share price drop, mixed with the general pessimism in the market right now, has left some investors wondering if Apple’s stock is still a buy.
On this front, Apple stands out as a tech company prepared to weather just about any storm. The company boasts nearly $100 billion of net cash and generates substantial free cash flow — the cold, hard cash left over after regular operations and business reinvestment covered. Trailing-12-month free cash flow was $64 billion, easily justifying Apple’s nearly trillion-dollar market capitalization.
In the first nine months of this fiscal year, FCF was $80.1 billion. The company spends the bulk of its FCF on dividends and share repurchases. This fiscal year, it paid an average price of $153.70, about 20% below the current share price. It wouldn’t be surprising crypto trader to see combined services and wearables revenue account for a third of the tech giant’s revenue in fiscal 2020. That’s a large enough share of revenue to have a material impact on Apple’s overall business given the two segment’s staggering growth rates.
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There are two competing arguments concerning the future of the most valuable company in the world.
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments.
Services Revenue grew by a strong 24% year-over-year, likely enabling better-fixed cost absorption. Apple also likely saw a large percentage of commission-driven revenues such as App sales and subscriptions, which are much more profitable. Perhaps equally as important, Apple is progressively expanding its services business.
It’s all about the services
The Growth Scorecard evaluates sales and earnings growth along with other important growth measures. This includes measuring aspects of the Income Statement, Statement of Cash Flows, the Balance Sheet, and more. Some of the items you’ll see in this category might look very familiar, while other items might be quite new to some.
Frequently asked questions about Apple (AAPL)
Apple sees iPhone and its Services segment accelerating year-over-year from the June quarter, while Mac and iPad performance is expected to decline. It expects gross margin to be between 44% and 45% for the upcoming quarter. As of September 2023, Apple is the world’s biggest tech company by value, with a market capitalization of $2.74 trillion.
The iPhone makes up just over 50% of Apple’s total revenue and is a major sales driver in its other product categories. The connectivity between the company’s devices and consistent design language throughout its lineup makes it more convenient for iPhone users to stick with Apple than stray to competing products. As a result, the tech giant has also achieved leading market shares in tablets, headphones, and smartwatches. After the stock’s outperformance in recent years, it currently trades at a trailing price-to-earnings (P/E) ratio of 29.4.
It could also mean that the smartphone will again account for the majority of Apple’s revenue. This made up about 41% of Apple’s overall revenue, down from about 50% over the previous nine months.However, that came right before a release of the new iPhone, which the company announced in mid-October. For Apple and the five other large tech companies being compared here, FCF can fluctuate greatly from quarter to quarter. Weak pre-sales for the non-Pro models are concerning as they are usually the highest-selling iPhones in the yearly lineup. In 2019, the base model iPhone 11 was the top-selling version every week in the year’s last quarter.
Analyst’s Opinion
Revenue in both the products and services businesses grew by double-digit rates year over year, climbing 10% and 15%, respectively. Getting more granular, every product segment except iPhone saw strong, double-digit growth during the period. Accounting for 18% of trailing-12-month revenue, services is the company’s second-largest segment.
However, the company’s ability to outperform the competition in smartphones and personal computers during the quarter proves its resilience. Meanwhile, it continues to see promising gains in its services business. Apple’s services segment grew by 8% year over year in Q3 2023, earning the second-largest portion of the company’s revenue at $21 billion.
ROE values, like other values, can vary significantly from one industry to another. While the one year change shows the current conditions, the longer look-back period shows how this metric has changed over time and helps put the current reading into proper perspective. Also, by looking at the rate of this item, rather than the actual dollar value, it makes for easier comparisons across the industry and peers. It’s typically categorized as a valuation metric and is most often quoted as Cash Flow per Share and as a Price to Cash flow ratio.
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