Apple Stock Forecast: AAPL plunged ahead of earnings
Apple stock retreats from record highs at $150.
AAPL releases Q3 results on July 27.
Broad markets continue to sell off on Monday.
Update July 19: Apple (AAPL) finished Monday down 2.69% at $142.45, as fears dominated Wall Street. The Dow Jones Industrial Average plummeted over 900 points intraday, ending the day minus 725 points. The S&P lost 1.59% while the Nasdaq Composite shed 1.06%. Heating US inflation fueled concerns the Federal Reserve will have to retrieve sooner than anticipated. Additionally, the coronavirus Delta variant is rapidly spreading in the Northern Hemisphere, spurring concerns about a slowing pace of economic recovery.
Apple stock remains in a strong bullish uptrend, but the short-term end goal looks a bit more questionable now that the broader market has turned around. We are now behind the most bullish time of the year, the first two months of July, and heading into results season with some high valuations. Can they be sustained? The investment banks certainly produced strong results, and soon it will be the turn of the tech titans. However, strong results do not necessarily mean strong stock prices. In Q2 Apple results came in over 40% ahead of Wall Street analyst expectations, but the stock fell in the days and weeks after results.
Apple (AAPL) will release Q3 2021 results next week on Tuesday, July 27.
Apple key statistics
Market Cap $2.44 trillion Enterprise Value $2.1 trillion Price/Earnings (P/E) 32 Price/Book 38 Price/Sales 9 Gross Margin 0.4 Net Margin 0.23 EBITDA $100 billion Average Wall Street rating and price target Buy $159
Apple (AAPL) stock forecast
The recent move to new record highs we have been calling for since early June has stopped out for now at $150, a nice psychological round number. There are a few reasons at play here. The market has finally started to run out of bullish momentum with S&P, Nasdaq and other indices all showing fresh losses again on Monday. The seasonality effect is now over, the first two weeks of July are the most bullish of the year. Results are next week, so many traders who have ridden the recent strong trend will close positions ahead of results. Taking a position into a big event, be it earnings or some other announcement, means increased risk and dealing with an unknown outcome. Seasoned and pro traders will likely cut risk into such an event.
Technically, the Relative Strength Index (RSI) is also overbought and has been this way from the last number of sessions. The previous high at $145.09 acts as an interim support as this corresponds nicely with the 9-day moving average. A break of this level could see a retracement back to $137-135. This is a nice strong support zone with plenty of volume to add to support from the volume profile we can see on the right of our chart. From $145 to $137, the volume is still pretty light, meaning there is not much support in evidence.
Apple (AAPL) Hits Fresh High: Is There Still Room to Run?
Shares of Apple (AAPL) have been strong performers lately, with the stock up 14.6% over the past month. The stock hit a new 52-week high of $149.57 in the previous session. Apple has gained 12.4% since the start of the year compared to the 21% move for the Zacks Computer and Technology sector and the 13.7% return for the Zacks Computer - Mini computers industry.
What’s Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn’t missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 28, 2021, Apple reported EPS of $1.4 versus consensus estimate of $1 while it beat the consensus revenue estimate by 15.41%.
For the current fiscal year, Apple is expected to post earnings of $5.19 per share on $356.51 billion in revenues. This represents a 58.23% change in EPS on a 29.87% change in revenues. For the next fiscal year, the company is expected to earn $5.36 per share on $372.87 billion in revenues. This represents a year-over-year change of 3.29% and 4.59%, respectively.
Valuation Metrics
Apple may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Apple has a Value Score of D. The stock’s Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 28.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 37X versus its peer group’s average of 9.8X. Additionally, the stock has a PEG ratio of 2.27. This isn’t enough to put the company in the top echelon of all stocks we cover from a value perspective.
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Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Apple currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Apple fits the bill. Thus, it seems as though Apple shares could still be poised for more gains ahead.
How Does Apple Stack Up to the Competition?
Shares of Apple have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Lenovo Group (LNVGY), Ricoh (RICOY), and Canon (CAJ), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Apple, even beyond its own solid fundamental situation.
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Apple (AAPL) Stock Sinks As Market Gains: What You Should Know
Apple (AAPL) closed the most recent trading day at $144.47, moving -0.44% from the previous trading session. This change lagged the S&P 500’s 0.35% gain on the day.
Prior to today’s trading, shares of the maker of iPhones, iPads and other products had gained 13.95% over the past month. This has outpaced the Computer and Technology sector’s gain of 5.62% and the S&P 500’s gain of 3.64% in that time.
AAPL will be looking to display strength as it nears its next earnings release, which is expected to be July 27, 2021. On that day, AAPL is projected to report earnings of $1 per share, which would represent year-over-year growth of 53.85%. Meanwhile, our latest consensus estimate is calling for revenue of $72.75 billion, up 21.88% from the prior-year quarter.
For the full year, our Zacks Consensus Estimates are projecting earnings of $5.18 per share and revenue of $356.27 billion, which would represent changes of +57.93% and +29.78%, respectively, from the prior year.
It is also important to note the recent changes to analyst estimates for AAPL. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company’s business and profitability.
Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.
The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.19% higher. AAPL is currently sporting a Zacks Rank of #2 (Buy).
In terms of valuation, AAPL is currently trading at a Forward P/E ratio of 27.99. For comparison, its industry has an average Forward P/E of 18.75, which means AAPL is trading at a premium to the group.
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We can also see that AAPL currently has a PEG ratio of 2.24. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. AAPL’s industry had an average PEG ratio of 1.28 as of yesterday’s close.
The Computer - Mini computers industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 21, putting it in the top 9% of all 250+ industries.
The Zacks Industry Rank gauges the strength of our 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.
You can find more information on all of these metrics, and much more, on Zacks.com.
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