Is Apple Inc. (AAPL) a Buy Right Now?

Apple (AAPL) has recently gained significant attention among investors. It's essential to look at the factors that may affect the stock's performance in the coming days.

In the last month, shares of Apple, known for its iPhones and iPads, have seen a return of +1.3%. This is slightly lower than the Zacks S&P 500 composite's change of +1.4%, as well as the Zacks Computer - Micro Computers industry's return of 1.4%. Now, the big question is: What direction will the stock take next?

Often, news or rumors related to major changes in a company can propel a stock into the 'trending' category, resulting in immediate price shifts. However, fundamental factors typically have a more lasting impact on the buy-and-hold decisions of investors.

Earnings Estimates Revisions

When evaluating a stock, one of the key aspects is the change in its projected earnings. Making sense of a company’s future earnings is crucial because it is this future stream of income that helps determine its fair market value.

We pay close attention to how analysts are revising their earnings estimates in relation to recent business trends. If estimates are on the rise, it usually signals that the fair value of the stock could also increase. Consequently, this might attract more investors, leading to price increases. Research indicates that there is a strong link between the changes in earnings estimates and movements in stock prices.

In the upcoming quarter, Apple is projected to earn $1.54 per share, which shows a +5.5% increase from the same quarter last year. However, this estimate has recently declined by -0.9% in the past 30 days.

The consensus for the current fiscal year's earnings is $6.65, reflecting an increase of +8.5% year-over-year. This estimate too has seen a slight downward revision of -0.2% over the last month.

Looking ahead to the next fiscal year, the consensus estimate rises to $7.53, indicating a +13.3% improvement from the previous year. Again, this estimate remains stable with a negligible change of -0.2%.

With a solid track record backed by audit standards, our proprietary stock rating tool signals a Zacks Rank of #3 (Hold) for Apple, reinforcing the importance of earnings estimate revisions as indicators of a stock's short-term price performance.

Revenue Growth Projections

While an increase in earnings is often seen as the best sign of a company's financial health, revenue growth is integral to sustaining those earnings. A company cannot consistently boost its earnings if it fails to grow its revenues.

For Apple, the consensus sales estimate stands at $94.43 billion for the current quarter, signaling an increase of +5.5% year-over-year. The projections for the current and next fiscal years are $390.54 billion (a +1.9% change) and $421.48 billion (a +7.9% change), respectively.

Recent Financial Results and Surprise History

In its most recent report, Apple recorded revenues of $85.78 billion, marking a +4.9% increase compared to the previous year. The company's earnings per share (EPS) for this period was $1.40, up from $1.26 last year.

When compared to the Zacks Consensus Estimate of $84.43 billion, the reported revenue exceeded expectations by +1.59%. The EPS also surprised with a +4.48% beat.

Apple has consistently surpassed consensus EPS estimates for the past four quarters and has done so with revenue as well.

Valuation Insights

Valuation is a critical aspect of investment decisions. It's important to determine if the current stock price truly reflects the intrinsic value of the business and its growth outlook.

Analyzing a company’s valuation multiples—such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF)—against its historical values can provide insights into whether the stock is fairly valued, overvalued, or undervalued. A comparison with peer companies helps identify if the stock price is justified.

In this regard, Apple has received a grade of D from our Zacks Value Style Score, indicating that it is trading at a premium compared to its peers. This suggests you may want to examine Apple's valuation metrics closely.

Final Thoughts

With all the points discussed, along with other details available, you can better assess the recent buzz surrounding Apple Inc. While its current Zacks Rank of #3 points to a performance closely aligned with the overall market in the near term, potential investors should weigh these elements critically.

Apple, Stocks, Earnings