Apple designs, develops, and markets consumer electronics products. Its digital gadgets include Mac computers, iPod mobile music players, iPhone smartphones, and iPad tablets. Furthermore, the company provides online services like iCloud personal file storage service, Apple Pay money transfer service and iTunes media streaming.
Rosenblatt Securities upgraded shares of tech giant Facebook from neutral to buy, disproving a downgrade from Bank of America. Here’s why.
Risk/Reward
Apple recently unveiled a high-yield savings account that pays more than 415 times more interest than Chase and Bank of America offer on basic savings accounts, in an attempt to entice customers away from large banks and attract more funds into Apple ecosystem.
But that is only half of the story; another key driver has been iPhone’s reacceleration in growth.
Gross margins have improved as well, thanks to competitive pricing from in-house processors and an advantageous supply environment. Sales continue to increase year after year.
These factors will continue to contribute to an acceleration in iPhone and Services revenue, helping the company fulfill its commitment of increasing shareholder value – prompting many analysts to see further upside for AAPL stock, such as Ivan Feinseth who maintains a Buy rating with a $240 price target for Apple shares.
Technicals
Apple stands out in an otherwise competitive marketplace with its focus on user experience and seamless integration of hardware and software products, particularly its iPhone and iPad devices that boast stunning designs with meticulous attention paid to detail, while Mac computers feature cutting-edge processor technology.
Apple, known for their consumer electronics and computer accessory offerings, is headquartered in Cupertino, California.
In September, Apple unveiled two new iPhones and an improved Apple Watch Series 9 smartwatch. Their phones include new processors as well as one featuring 5-times optical zoom camera technology with tetraprism lens lens technology.
Apple’s services business is experiencing sustained expansion with paid subscriptions reaching over 2 billion devices. Thanks to their competitive positioning in smartphones, strong product demand, and large customer base, AAPL provides an attractive trading environment. Our summary signals for AAPL reflect this favorable trading environment.
Earnings
Apple was the first U.S. company to reach $3 trillion market valuation, marking another milestone of this year’s tech rally and signaling a potential upswing in valuation since COVID-19 pandemic. But for investors to see this valuation continue growing at its present rate, profitability must improve significantly for Apple stock.
Apple currently sits on an impressive earnings multiple of 33, meaning shareholders are paying nearly half what the company makes for each share they own. To reach its median multiple of 24, GAAP profits will need to grow at an annualized rate of at least 3% over the next five years.
Apple remains to be seen if they can meet this goal; but with a leading position in generative AI and an established services business that attracts millions daily users, as well as its iconic consumer staple platform which people look at four hours each day, they appear well equipped for success in doing just that.
Upside
As Bank of America’s upgrade of Apple stock demonstrates, there’s considerable upside potential for its shares. One key positive sign was iPhone revenue turning positive in December quarter and possibly increasing during holiday sales periods; a remarkable turnaround from earlier expectations of flat hardware sales that indicates its core business has stabilized after experiencing recent instability.
An additional factor bolstering optimism is that iPhone 15 supply appears to have met demand; wait times in both the U.S. and China are now “essentially nonexistent”, in comparison with materially increased wait times shortly after its debut last year.
As such, IBD Stock Checkup’s Potential Upside metric stands at 2.07. This measures how far AAPL shares could rise should all supporting factors remain intact. You can subscribe to IBD’s FREE Stock Checkup newsletter for even more exclusive ratings information by clicking here to begin!
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