Shares of Apple AAPL are up roughly 10% over the last three months as investors show their confidence in the world’s most valuable company. Now let’s check out why the iPhone giant looks like a strong buy stock at the moment.
Apple had been criticized for years about its overreliance on the iPhone. This might sound counterintuitive since the iPhone almost single-handily turned Apple into the powerhouse it is today. But nothing lasts forever. Luckily, Apple as actively focused on other growth areas. One of the biggest new Apple units is its Services business, which includes Apple Music.
Last quarter, the division surged by 31% to hit $9.19 billion, making it Apple’s second-biggest revenue generator, nearly outpacing iPad and Mac’s growth combined. Meanwhile, Apple’s second-quarter revenues jumped by 16% to reach $61.14 billion, with iPhone revenues up 14%.
Apple Music is already closing in on streaming music powerhouse Spotify SPOT in the U.S. market. The company’s premium streaming service reportedly boasts between 21 million and 21.5 million subscribers in the U.S., which came in just behind Spotify’s roughly 22.5 million. But Apple is projected to surpass the much older Spotify in the U.S. by next month.
CEO Tim Cook and Apple have also somewhat quietly prepared to make a streaming TV splash that will see the company compete directly against the likes of Netflix NFLX, Amazon AMZN, Hulu, and soon enough Disney DIS. It is unclear exactly what Apple’s streaming TV service will look like or when it will launch. But the company has gone on a major spending spree to scoop up original TV content, featuring some of the biggest directors and actors in Hollywood, including Jennifer Aniston, Reese Witherspoon, M. Night Shyamalan, and many more.
Shares of Apple have not performed as well over the last three years as some might assume, up roughly 44% compared the S&P 500’s 32% climb. Investors will see that AAPL stock has skyrocketed over the last two years. Yet, shares of Apple are up just 26% over the last 12 months, with some pretty aggressive turbulence throughout—mostly centered on Chinese trade war concerns.
Moving on, AAPL stock is currently trading at 15.3X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to the S&P’s 17.3X average.
Over the last year, Apple has traded as high as 17.2X and as low as 13.2X, with a one-year median of 15X, which means Apple’s valuation picture is hardly stretched at the moment compared to where it has traded at over the last year. And investors will note that the company’s valuation picture looks strong historically, considering its massive stock price climb.
Q3 & Full-Year Outlook
Looking ahead, Apple’s fiscal third-quarter revenues are projected to climb by over 15% to hit $52.37 billion, based on our current Zacks Consensus Estimates. Apple’s top line is expected to expand by 13.5% from $229.23 billion in fiscal 2017 to an eye-popping $260.18 billion this year.
Investors might be even more impressed by Apple’s earnings projections, with the company expected to see its adjusted Q3 ESP figure expand by roughly 31% to touch $2.19 per share. For fiscal 2018, Apple’s earnings are projected to climb by 24% to hit $11.42 per share.
Apple is currently a Zacks Rank #1 (Strong Buy) and sports a “B” grade for Value in our Style Scores system. The company is also expected to expand both its top and bottom lines this quarter and for the year, while also jumping into new growth areas. Therefore, Apple might be a stock to consider at the moment, especially as we approach the release of its Q3 earnings results on July 31.
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