Apple ($AAPL)

Apple (NASDAQ: AAPL) turned into one of the top hot tech stocks for investors last decade and it emerged as the most admired brand, with expectations that the technology giant will continue to innovate the world heading into the next decade.

Indeed, market pundits believe the technology giant could enter the auto industry in the coming years.

Apple started working as an electronics and personal computers business, but its business eventually expanded to several other markets.

Its product line now ranges from 5G supported smartphones and other electronic devices to apparel and services.

The tech giant has also been expanding its Apple store count at a substantial pace to improve its presence in international markets. The company has also been competing with entertainment companies with the launch of the studio and live streaming business.

The Chief Executive Officer Tim Cook is the key man behind Apple’s success and making it the most worthy investment of the last decade.

Warren Buffett, the legendary investor, is among the biggest fans of Apple.

“It’s probably the best business I know in the world. And that is a bigger commitment than we have in any business except insurance and the railroad,” Warren Buffet said. “I don’t think of Apple as a stock. I think of it as our third business,”

he added.

Apple stock is listed on NASDAQ (US stock exchange index). Its market capitalisation of more than $2.2 trillion makes it the largest company on the US Stock market.

It is the second-largest company in the world after Saudi Aramco based on market capitalisation.

What is market capitalization? Market capitalization represents the total value of a company, which comes by multiplying the number of stocks outstanding by the current share price.

What is the Apple IPO history?

Apple became a publicly listed company on December 12, 1980. Its Initial Public Offering, or IPO, the share price was at $22. It was the largest IPO of its day since Ford Motor Company in 1956.

Almost 40 out of 1,000 Apple employees become millionaires while the founder Steve Jobs ended the IPO day with a net worth of $217 million.

Original Apple ($AAPL) IPO WSJ Newspaper

The company started working as a small computer company. Apple stock was initially priced at $14 per share but it started trading at $22 and shares sold out immediately. Apple stock price soared almost 32% on the first trading day and ended the trading day with a closing value of $29.

Apple Stock Price History Since IPO

After a hot IPO, things went wrong for the computer company due to internal problems. Apple stock turned into a penny stock for the next two decades.

The shares of Apple stock regained momentum in 2005, soaring more than 120% amid expectations for technological innovations. The first iPhones left Apple stores and entered history on June 29, 2007.

Shares of Apple jumped more than 133% in fiscal 2007 but fell back sharply in 2008 due to the historic meltdown.

Shares rebounded strongly in 2009 amid new product launches and record profits. Below is the price history of Apple shares adjusted for stock splits.

Apple stock price history. Source: macrotrends.net

Is Apple a Good stock to Buy?

Apple is among the hot tech companies heading into a new decade.

Its shares are currently trading close to a record level of $136 after adjusted for splits. Its share price rallied almost 80% in fiscal 2020, accelerating the five years gains to 400%.

Apple Business Highlights 2020 source: apple.com

Apple shares soared more than 1000% in the last decade. Apple’s bull case target price stands around $190 for 2021. It has been receiving strong buy ratings from the majority of market analysts.

What are Apple stock Fundamentals?

Despite robust past performances, the market pundits believe investors should base their investment decision on future fundamentals.

The analysts say Apple stock price has significant upside potential ahead and it could be the best investment heading into the new decade.

Apple’s strategy of entering new markets is paying off significantly to shareholders. The company has significantly reduced its dependence on iPhones. The management under Tim Cook has aggressively worked on expanding non-iPhone revenue.

This strategy helped the company to generate record revenue, earnings and cash flow in the September quarter despite a huge decline in iPhone revenues.

“Our outstanding September quarter performance concludes a remarkable fiscal year, where we established new all-time records for revenue, earnings per share, and free cash flow, in spite of an extremely volatile and challenging macro environment. Our sales results and the unmatched loyalty of our customers drove our active installed base of devices to an all-time high in all of our major product categories. We also returned nearly $22 billion to shareholders during the quarter, as we maintain our target of reaching a net cash neutral position over time,”

says CFO Luca Maestri.

Its iPad revenue came in at $6.8 billion and Mac revenue hit an all-time high of $9.03 billion. Moreover, Wearables, Home and Accessories revenue stood around $7.9 billion while Services revenue jumped to an all-time high of $14.5 billion.

The non-iPhone revenue topped iPhone revenue in the latest quarter. The market analysts believe Apple’s strategy of expanding the store count as well as the introduction of new devices would further enhance its revenue base.

Its services revenue has been growing at a massive pace, accounting for almost 20% of overall revenue in the latest quarter. Services revenue include revenue from Music, TV+, Arcade, iCloud, News, App store and Fitness.

The studio business has also been gaining consumers and investors’ confidence. The market reports suggest Apple’s streaming business would generate billions of dollars for the tech giant in the days ahead.

What is the Apple iPhone sales forecast?

iPhone sales fell sharply in the last couple of quarters due to the pandemic and the delay in iPhone 12 launch.

The tech giants iPhone revenue fell to $26 billion in the September quarter of 2020 compared to revenue of $33 billion in the year-ago period.

However, the world’s largest company responded aggressively to the drop in Apple’s flagship product. The company came up with several low priced new 5G supported smartphone lineups. In addition, the company also launched the most awaited iPhone 12 last month, which is expected to boost iPhone sales growth heading into 2021.

Nikkei Asian reported Apple will produce 95 million to 96 million iPhones in the next six months, representing a year over year growth of 30%. The production target includes the newer 5G-enabled iPhone 12 devices and older models like the iPhone 11. Moreover, Nikkei Asian claims iPhones production will exceed 230 million iPhones next year.

“While we believe it will take carriers years to build a compelling 5G infrastructure, Apple is ready today with a lineup of phones that should enjoy a three-year upgrade cycle, compared to a typical one-year duration. Additionally, the company continues to advance augmented reality,”

writes Loup Ventures analysts Gene Munster and David Stokman.

Morgan Stanley also came up with a bullish forecast. The bank has provided a $191 price target amid robust iPhone demand.

Apple product revenue growth (Y/Y) vs. MS GDP Forecasts (Y/Y) source: Morgan Stanley Research

“Our conviction in the AAPL bull case is rising with iPhone 12 Pro lead times at record levels, upward revisions to supply chain forecasts, and US carriers noting strong initial demand. Our AlphaWise consumer survey outlines a bull case that is much higher than we previously thought, with iPhone upgrades expected to outperform other vendors and our past surveys correlating to future growth,”

Morgan Stanley analyst said.

Is Apple a good dividend stock to buy?

Apple is one of the fastest dividend growth companies. The largest tech giant has raised dividends in the past nine successive years. The average dividend growth rate stands above 10% in the past five years. It currently offers a quarterly dividend of $0.20 per share. The company has returned $14 billion to shareholders in quarterly cash dividends in the latest quarter.

Its dividends are safe. This is because of the robust outlook and strong financial numbers. The company has generated a record September quarter revenue of $67 billion while earnings per share came in at $0.73 per share. The company is distributing only 20% of profits to shareholders in the form of dividends. Its dividends also look safe based on cash flows. Its cash flows are offering a complete cover to dividends payments.

Does Apple Offer Share Buybacks?

Apple has aggressively been working on lowering the number of outstanding shares. It has repurchased almost $8 billion of outstanding common stock in the September quarter, bringing the trailing twelve months share buybacks to $72 billion.

Since initiating a stock buyback program in 2013, Apple repurchased close to $400 billion of common outstanding stock. The company expects to accelerate the share buyback program in order to take advantage of lower interest rates.

Apple share buyback pace. Source: AboveAvalon

Source: AboveAvalon

Share buybacks are always positive for the company and its shareholders. This is because a lower share count increases the demand. In addition, a low number of outstanding shares enhances dividends and earnings per share.

What are Apple Stock Price Valuations?

Apple stock price valuations are currently trading at record levels amid the robust share price rally in the past couple of quarters.

What is Apple Price to Earnings Ratio?

Apple stock is currently trading at a record price to earnings ratio of 40 compared to the industry average of 27 times to earnings. The ratio soared sharply this year due to an 80% share price gain.

Note: What is the price to earnings ratio? The process of valuing stock based on share price compared to earnings is known as the price to earnings ratio.

What is Apple Price to Sales Ratio?

The world largest tech giant’s price to sales ratio is standing at an all-time high of 8.43 compared to the industry average of 2.67 and five year average of 4.

Note: What is the price to sales ratio? Valuing stock by comparing a company’s stock price to its revenues.

What is Apple Price to Book Ratio?

Apple stock is trading at a record price to book ratio of 34 at present. It is significantly higher from a five year average of 9.51 and the industry average of 3.73.

Note: What is a price to book ratio? Companies use the price-to-book ratio to compare a firm’s market capitalization to its book value.