Newsletter Login

Username:

Password:


Need help logging in?

New Subscriber?
Start Here!

Q & A


I've read that the Dow Theory is too old school, and that it runs at a lag. Why do you pay attention to it?



Read More from Q&A


Tools & Resources

Stock Spotlight

Apple ripe for purchase

 
Recent Price
$218
 
Dividend
$2.92
 
Yield
1.3%
 
P/E Ratio
20
 
Shares (millions)
4,927
 
Long-Term Debt as % of Capital
46%
 
52-Week Price Range
$229.67 - $149.16

Apple ($218; AAPL) fell into a lull back in 2016. Its profits and sales contracted as consumers began holding onto their smartphones longer and the initial novelty of the iPad tablet computer wore off.

Two years later, things are looking up. Now the apple of the market’s eye, the stock has surged 32% in 2018. That rally, which made Apple the first U.S. company to breach the $1 trillion barrier for stock-market value, coincides with the company returning to its growth ways.

For the 12 months ended June, Apple grew per-share profits 27%, revenue 14%, operating cash flow 15%, and free cash flow 18% to $45.98 billion. Its growth is balanced, with 12-month sales up 11% to 15% across geographic markets.

Apple expects sales to climb 14% to 18% in the September quarter, ahead of analyst estimates at the time of the announcement. The consensus now calls for 16% growth, still leaving some room for upside. We see Apple having further to run in its current up-cycle; the stock is a Focus List Buy and a Long-Term Buy.

Business breakdown

Within the sluggish smartphone market, Apple is using its pricing power to grow sales. Apple sold just 1% more iPhone units over the past 12 months, but its segment revenue climbed 13%. With the iPhone’s average selling price up 20% over the last year to $724, Apple’s iPhone X appears to be winning over consumers after a modest launch. One analyst has even suggested that the iPhone X may be too successful, bringing forward sales Apple would normally see next year.

Apple’s fate may be forever linked to the iPhone (62% of sales), though the company currently relies on auxiliary products to drive growth. Services (Apple Pay, AppleCare, and digital content) delivered 28% higher sales in the past year to become Apple’s second largest segment at 14% of total revenue. Other products (including Apple TV, Apple Watch, iPod, and Beats) posted 37% sales growth but remains the smallest unit (6% of revenue).

Apple reportedly plans to introduce a new, low-cost MacBook, similar to its MacBook Air, this fall. The move may help revive waning Mac sales (revenue up 3% in the 12 months ended June but units sold down 2%). The company unveiled three new iPhones in September, and expected to unveil an Apple Watch with a bigger screen and an iPad Pro later this year.

The share count has shrunk 26% since Apple began repurchasing shares in the December 2012 quarter. Yet since first announcing its capital allocation plan in March 2012, cash and marketable securities on Apple’s balance sheet have swelled to $243.7 billion from $98 billion.

Apple has generated $503 billion in operating cash flow over the past decade — $101 billion more than any other S&P 1500 company.

Conclusion

The shares have risen 17% over the last month and now trade at 20 times trailing earnings, in line with the sector median. Backing out net cash and marketable securities of $30 per share, the trailing P/E is 18.

An annual report for Apple Inc. can be obtained at 1 Infinite Loop, Cupertino, CA 95014; (408) 996-1010; www.apple.com.

 

Apple

 
Quarter Per-Share Earnings Sales Change Quarterly Price Range P/E Ratio Range
Jun '18 $2.34 vs. $1.67 17% $194.20 - $160.63 19 - 16
Mar '18 2.73 vs. 2.10 16% 183.50 - 150.24 19 - 15
Dec '17 3.89 vs. 3.36 13% 177.20 - 152.46 19 - 17
Sep '17 2.07 vs. 1.67 12% 164.94 - 142.41 19 - 16

 
Year (Sep.) Sales (Bil.) Per-Share Earnings* Per-Share Dividend 52-Week Price Range P/E Ratio Range
2017 $229.2 $9.20 $2.40 $164.94 - $104.08 18 - 11
2016 215.1 8.31 2.18 123.82 - 89.47 15 - 11
2015 233.7 9.22 1.98 134.54 - 92.00 15 - 10
2014 182.8 6.45 1.82 103.74 - 68.33 16 - 11

 
Quadrix Scores
Overall Momentum Value Quality Financial Strength Earnings Estimates Performance
84 79 41 92 77 71 87

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

More Investment Newsletters and Services

Drip Investor

DRIP Investor — how you can buy dividend-paying stocks without a broker.

Visit us at DRIP Investor, your source for dividend reinvestment plans.

Lazy Investor

The Lazy Investor — free weekly e-letter that delivers market updates and stock market information via email.

Visit us at The Lazy Investor, our free investment newsletter.

Horizon Investment

Horizon — registered investment advisor seeks to provide investors at all stages the ability to build, preserve and enjoy wealth.

Visit us at Horizon Investment Services to get started in an investment program that's right for you.

Upside

Upside — discovers today's small and midcap stocks poised to be tomorrow's Blue Chip leaders.

Visit us at Upside, your guide to the best buys in small and midcap stocks.

Current Hotline

Friday, September 21, 2018

It took a while to get there, but on Sept. 20, the Dow Industrials finally closed above their January high

Read More from the Hotline

Stock Spotlight

Apple ripe for purchase

Wednesday, September 19, 2018

Apple ($218; AAPL) fell into a lull back in 2016. Its profits and sales contracted as consumers began holding onto their smartphones longer and the initial novelty of the iPad tablet computer...

Read More from Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com