Can anything stop tech juggernaut Apple Inc. (NASDAQ:AAPL)? The Cupertino-based company is set to report second-quarter fiscal 2017 earnings results after the closing the bell Tuesday, but is it too late to bite into AAPL stock?
With Apple shares now trading at all-time highs and ranking as the best-performer in the Dow Jones Industrial Average, driven by its 17% rise over the past three months, there’s tons of optimism built in.
AAPL has soared 24% year-to-date, crushing not only all the major indices, but also performing in line with the “Fang” stocks: Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
All told, Apple has been on a winning streak over the past year, and in the process AAPL stock has made investors tons of money with almost 30% returns. And following Tuesday’s results, these shares should head higher, on their way toward $160 to $165 per share in the next 12 to 18 months, delivering 15% returns.
And that’s on the conservative side.
Expectations for the Quarter
For the quarter that ended March, Apple is expected to earn $2.02 per share on revenue of $52.97 billion, translating to year-over-year growth of 6.3% and 4.8%, respectively. For the full year, ending December, earnings are projected to rise 7.7% year over year to $8.95 per share, while full year revenue of $228.57 billion would rise 6% year over year.
The quarterly and full-year projections aren’t breathtaking, but Apple is on the verge of its super-cycle, including the upcoming launch of its iPhone 8. The tenth-anniversary iPhone, which will feature a new OLED display, could sell for more than $1,000 per device.
Considering that Apple, which sold more than 78 million phones in 2016’s holiday quarter, has surpassed Samsung Electronics (OTCMKTS:SSNLF) in market share, according to data just released research firm Gartner, Apple’s profits should head higher.
On Tuesday, analysts will also focus on the Apple’s transition to beyond the iPhone — the company’s Services revenue, which includes Apple Music, the App Store, iCloud, AppleCare and Apple Pay, is its next growth frontier.
Services revenue grew 17.5% to $7.17 billion in the first quarter, topping forecasts of $6.91 billion. With Services quickly becoming Apple’s second-largest business segment, while producing higher margins, this makes AAPL stock less risky, despite its all-time high status.
Bottom Line on AAPL Stock
When factoring Apple’s massive cash stockpile of more than $250 billion, AAPL stock — despite trading at all-time highs — still looks like a bargain.
Based on fiscal 2018 consensus estimates of $10.28 per share, Apple stock is priced at forward price-earnings ratio of just 14, which is about four points below the S&P 500 Index.
Assuming AAPL was priced on par with the rest of the market, shares would trade today at around $165 to $170 — excellent value when combined with a 1.60% annual yield.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
