Over the past month, the share value of Apple Inc. stock (NASDAQ: AAPL) has risen nearly 10%, currently at $150.06 per share. This value sits near the median of not only the most recent 12-month price target range ($122.00 to $200.00) but also the stock's overall 52-week range ($129.04 to $182.94). Moving forward, analysts evaluating Apple's 12-month price target have rated the stock a MODERATE BUY rating, offering a consensus price target of $180.00.
Earnings Consistently Beat Expectations
Apple Inc. has a current valuation of $2.09 Earnings Per Share (EPS) on $127.5B in sales. This is already nearly double the stock's reported EPS during the October 27th earnings call: at a value of $1.29, which beat the estimate by $0.02. Their next reporting date is scheduled for Jan 26, which should give them a lot of time to continue pressing forward
For the past four quarters, the Apple Inc. earnings forecast has consistently beat the consensus, with Q1 of 2022 surpassing the whole range as well. A quick look at sales for the quarter suggests the same, as the $123.9B in sales they did during Q1 2022, easily beat the consensus estimate of $119.0B. That said, quarterly sales followed a similar trend of consistent estimate beats across the most recent four quarters.
On an annual basis, the trend is also much of the same: actual earnings consistently beat the consensus estimate. Sometimes earnings only bested the target by a little and sometimes it beat the range entirely. What really matters, here, is that the price target has increased from $2.92 in 2019 to $6.10 this year. In terms of annual sales, the consensus estimate has grown from $259.10B in 2019 to $366.20B this year; and beat the consensus estimate every year but 2021.
Apple Hopes Keeping iPhone Prices Down Will Drive Sales
Apple has already begun raising prices on some of its services but, fortunately, has kept iPhone pricing the same; at least for now. And this comes at a time when the tech giant is expected to turn out the lowest gross margin on iPhone sales in the last four years. This makes expanding gross profit from their services sector more and more important.
Indeed, this is crucial, as phone prices—across the industry—continue to go up. Of course, much of the price increases reflect the quality of the gadgetry and capabilities of the technology but raw material costs are up at least 20% (between the iPhone 13 Pro Max and the iPhone 14 Pro Max). All in all, the component cost to manufacture the iPhone accounts for approximately 46% of their asking price, this year.
Yes, that inflation is shocking: and the reason it is so shocking—here—is that Apple has elected to NOT pass on those price increases to the consumer. This means, for one, that the iPhone is more attractive than other phone models on the market, whose manufacturers may have raised prices to keep pace with inflation.
It is a significantly brave strategy for a company that counted the iPhone as 52% of total revenue, last year. Still, Mac outperformed last year, with revenue surging to nearly 13% in the fiscal fourth quarter. Combined with iPhone sales, hardware revenue accounted for 81.3% of fiscal fourth quarter revenue. That is actually down from 81.6% the previous quarter.
Strong Valuation and Momentum Keep Apple Competitive
Because Apple Inc is a unique technology company that builds both hardware and software, its competition is broad. That said, AAPL is performing comparably against companies like Microsoft and Dell and, perhaps a little better than the electronics industry, computer sector, and NASDAQ exchange, overall. Apple is also outperforming the whole of the S&P 500, which is up only 7% across the same trading period.
At their current stock value, AAPL sits at 40% of its 52-week range; Microsoft Co (NASDAQ: MSFT) and Dell Technologies are both in the lower third of their ranges.
Though, both Microsoft's and Dell's (NYSE: DELL) stock values have upsides, on average, about twice that of AAPL. Apple's Price-to-Sales ratio (6.25) may be better than Microsoft but Dell is hard to beat at a P/S of 0.28. Apple's Price-to-earnings ratio (24.66) is fair—and nearly identical to that of Microsoft—but Dell wins again with a somewhat incredible P/E of 5.66.
Dell outpaces the group again in terms of Return on Equity (RoE). At 305.1%, Dell's RoE is easily twice that of Apple, which is nearly thrice that of Microsoft. However, Apple has the best Return on Assets (RoA), at 28.03%. Dell is actually the lowest of the three, all the way down at 5.64%.
Of the three, though, Microsoft has the best-projected earnings growth, at 13.50% as well as the lowest beta value (0.97). In fact, MSFT is the only stock with negative volatility. AAPL still has a fair 8.10% projected earnings growth with a beta of 1.25.
But after all, is said and done, analysts give all three stocks a BUY rating; and, with AAPL's volatility, it can sometimes be considered a MODERATE or even STRONG buy.