Over the past month, the share value of Apple Inc. stock (NASDAQ: AAPL) is up nearly 10%, currently at $150.06 per share. This value is near the median of not only the stock’s most recent 12-month price target range ($122.00 to $200.00), but also the stock’s overall 52-week range ($129.04 to $120.00). 182.94). Going forward, analysts evaluating Apple’s 12-month price target have assessed the stock a MODERATE BUY ratingwith a consensus price target of $180.00.
Revenues consistently exceed expectations
Apple Inc. has a current valuation of $2.09 EPS on $127.5 billion in revenue. This is already nearly double the share’s reported earnings per share as of Oct. 27e Profit Call: Worth $1.29, which exceeds estimate by $0.02. Their next reporting date is scheduled for January 26, which should give them plenty of time to continue moving forward
For the past four quarters, Apple Inc. profit forecast has consistently beaten the consensus, with the first quarter of 2022 also surpassing the entire range. A quick look at revenue for the quarter suggests the same thing, as the $123.9 billion in sales they made in the first quarter of 2022 easily beat the consensus estimate of $119.0 billion. That said, quarterly sales followed a similar trend of consistent estimates in the most recent four quarters.
Year-over-year, the trend is also largely the same: actual gains consistently exceed consensus estimate. Sometimes the gains only slightly exceeded the target and sometimes it completely exceeded the reach. What’s really important here is that the price target has increased from $2.92 in 2019 to $6.10 this year. In terms of annual sales, the consensus estimate has grown from $259.10 billion in 2019 to $366.20 billion this year; and beat the consensus estimate every year but 2021.
Apple hopes iPhone prices will stay low to boost sales
Apple has already started raising prices for some of its services, but has thankfully kept iPhone prices the same; at least for now. And this comes at a time when the tech giant is expected to record its lowest gross margin on iPhone sales in the past four years. As a result, increasing gross profit from their service sector is becoming increasingly important.
This is indeed critical, as phone prices – across the industry – continue to rise. Of course, many of the price increases reflect the quality of the gadgets and the capabilities of the technology, but the raw material costs have increased by at least 20% (between the iPhone 13 Pro Max and the iPhone 14 Pro Max). All in all, the cost of components to manufacture the iPhone represents about 46% of their asking price this year.
Yes, that inflation is shocking: and the reason it’s so shocking – here – is that Apple has chosen NOT to pass those price increases on to consumers. This means, for example, that the iPhone is more attractive than other phone models on the market, whose manufacturers may have increased prices to keep up with inflation.
It’s a pretty bold strategy for a company that accounted for 52% of total sales last year with the iPhone. Still, Mac outperformed last year, with revenue rising to nearly 13% in the fiscal fourth quarter. Combined with iPhone sales, hardware revenues accounted for 81.3% of revenue in the fiscal fourth quarter. That is even less than 81.6% in the previous quarter.
Strong valuation and momentum keep Apple competitive
Since Apple Inc is a unique technology company that builds both hardware and software, the competition is fierce. That said, AAPL performs comparable to companies like Microsoft and Dell and perhaps slightly better than the electronics industry, computer industry and NASDAQ stock market in general. Apple also outperforms the entire S&P 500, which only 7% up over the same trading period.
At their current stock value, AAPL sits at 40% of the 52-week range; Microsoft Co (NASDAQ: MSFT) and Dell Technologies are both in the lower third of their range.
While both those from Microsoft and Dell (NYSE: DELL) stock values average about double that of AAPL. Apple’s price-to-sales ratio (6.25) may be better than Microsoft’s, but Dell is hard to beat with a P/S of 0.28. Apple’s P/E ratio (24.66) is decent – and almost identical to Microsoft’s – but Dell wins again with a somewhat unbelievable P/E of 5.66.
Dell again outperforms the group in terms of Return on Equity (RoE). At 305.1%, Dell’s RoE is easily twice as high as Apple’s, which is nearly three times that of Microsoft. However, Apple has the best Return on Assets (RoA), at 28.03%. Dell is actually the lowest of the three, all the way down at 5.64%.
However, of the three, Microsoft has the best expected earnings growth at 13.50% and the lowest beta value (0.97). In fact, MSFT is the only stock with negative volatility. AAPL still has reasonable expected earnings growth of 8.10% with a beta of 1.25.
But it’s said and done, analysts are giving all three stocks a BUY rating; and, with AAPL’s volatility, it can sometimes be considered a MODERATE or even STRONG buy.