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Time to Buy the World's Most Valuable Company as Earnings Approach
As the world’s most valuable company, markets will pay close attention to results for Apple’s fiscal third quarter on Thursday, August 1.
Edging Microsoft with a market cap of over $3.3 trillion, let’s see if it’s time to buy Apple’s stock as earnings approach.
Apple’s Q3 Expectations
Ranging from games to subscriptions for movies and music, services revenue has helped sustain Apple’s robust top line. Along with its iconic app store, this includes Apple Pay and AppleCare with Q3 Services revenue expected to spike 13% to $23.99 billion.
However, Product revenue which is led by Apple’s flagship iPhone is expected to dip to $60.06 billion compared to $60.58 billion in the comparative quarter. Overall, Apple’s Q3 sales are still projected to rise 3% to $84.38 billion.
On the bottom line, Apple’s Q2 EPS is thought to have increased 6% to $1.34 versus $1.26 per share a year ago. Notably, Apple has surpassed bottom line expectations for five consecutive quarters posting an average earnings surprise of 4.14% in its last four quarterly reports.
Apple Intelligence
Wall Street will be looking for updates on Apple’s plans to expand into generative AI which will concentrate on personal intelligence systems for the iPhone, iPad, and MacBook. Apple is also testing a ChatGPT-style generative AI tool called “ASK” for AppleCare Support along with upgrading its digital voice assistant Siri.
Apple has stated it believes in the transformative power and promise of AI and has the advantages to differentiate itself in the new era of tech. The company has worked closely with Taiwan Semiconductor in this regard which provides the M3 chip for its MacBook Air. Apple deems the MacBook Air as the best consumer laptop for AI with breakthrough performance including a more powerful neural engine.
YTD Performance
Year to date, Apple’s stock is up a respectable +12% although this has slightly trailed the broader indexes and most of its "Magnificent Seven" peers outside of Microsoft and Tesla.
Monitoring Apple’s Valuation
Checking out one of Apple’s key fundamental valuation metrics, AAPL currently commands a modest premium to the broader market at 33.1X forward earnings compared to the S&P 500’s 23X. It’s noteworthy that Apple trades below its decade-long high of 38.6X forward earnings but noticeably above the median of 18.1X.
Takeaway
Ahead of its Q3 report, Apple’s stock lands a Zacks Rank #3 (Hold). Reaching or exceeding quarterly expectations may be crucial to more upside in Apple’s stock as its valuation does allude to the notion that there could be better buying opportunities ahead.
That said, Apple is a cash cow that has the resources to expand and potentially capitalize on artificial intelligence which could be very rewarding for long-term investors.
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Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Apple, Microsoft, Taiwan Semiconductor and Tesla
For Immediate Release
Chicago, IL – July 31, 2024 – Today, Zacks Investment Ideas feature highlights Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , Taiwan Semiconductor (TSM - Free Report) and Tesla (TSLA - Free Report) .
Time to Buy the World's Most Valuable Company as Earnings Approach
As the world’s most valuable company, markets will pay close attention to results for Apple’s fiscal third quarter on Thursday, August 1.
Edging Microsoft with a market cap of over $3.3 trillion, let’s see if it’s time to buy Apple’s stock as earnings approach.
Apple’s Q3 Expectations
Ranging from games to subscriptions for movies and music, services revenue has helped sustain Apple’s robust top line. Along with its iconic app store, this includes Apple Pay and AppleCare with Q3 Services revenue expected to spike 13% to $23.99 billion.
However, Product revenue which is led by Apple’s flagship iPhone is expected to dip to $60.06 billion compared to $60.58 billion in the comparative quarter. Overall, Apple’s Q3 sales are still projected to rise 3% to $84.38 billion.
On the bottom line, Apple’s Q2 EPS is thought to have increased 6% to $1.34 versus $1.26 per share a year ago. Notably, Apple has surpassed bottom line expectations for five consecutive quarters posting an average earnings surprise of 4.14% in its last four quarterly reports.
Apple Intelligence
Wall Street will be looking for updates on Apple’s plans to expand into generative AI which will concentrate on personal intelligence systems for the iPhone, iPad, and MacBook. Apple is also testing a ChatGPT-style generative AI tool called “ASK” for AppleCare Support along with upgrading its digital voice assistant Siri.
Apple has stated it believes in the transformative power and promise of AI and has the advantages to differentiate itself in the new era of tech. The company has worked closely with Taiwan Semiconductor in this regard which provides the M3 chip for its MacBook Air. Apple deems the MacBook Air as the best consumer laptop for AI with breakthrough performance including a more powerful neural engine.
YTD Performance
Year to date, Apple’s stock is up a respectable +12% although this has slightly trailed the broader indexes and most of its "Magnificent Seven" peers outside of Microsoft and Tesla.
Monitoring Apple’s Valuation
Checking out one of Apple’s key fundamental valuation metrics, AAPL currently commands a modest premium to the broader market at 33.1X forward earnings compared to the S&P 500’s 23X. It’s noteworthy that Apple trades below its decade-long high of 38.6X forward earnings but noticeably above the median of 18.1X.
Takeaway
Ahead of its Q3 report, Apple’s stock lands a Zacks Rank #3 (Hold). Reaching or exceeding quarterly expectations may be crucial to more upside in Apple’s stock as its valuation does allude to the notion that there could be better buying opportunities ahead.
That said, Apple is a cash cow that has the resources to expand and potentially capitalize on artificial intelligence which could be very rewarding for long-term investors.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.