This Apple Stock Predictions article was written by Talia Shakhnovsky, a Financial Analyst at I Know First.
The new credit card is “the most significant change in the credit card experience in 50 years.”
– Apple CEO Tim Cook
- Recession risk is increasing due to trade tensions and consumer pullback.
- Within the Technology Sector, Apple is stable and efficient compared to competitors.
- Apple’s focus on services and wearables is key to further growth.
- Recent innovation supports a long-term bullish AAPL stock prediction.
Market Overview: Trade War Terrors
The Trump administration’s latest round of tariffs will potentially raise prices on consumer goods including clothes, shoes, and sporting goods. On Sunday, September 1st, 2019, the latest round of tariffs took effect totalling a 15% tariff on $112 billion worth of imports from China. Now, more than two-thirds of the consumer goods the US imports from China are subject to a tariff. Some analysts worry that growing retail prices may decrease consumer spending – the U.S. economy’s main economic driver. Moreover, economic expansion is widely expected to slow due to slowing income growth, delayed business expansions, and the continuing trade war.
For investors, slowing economic growth may decrease stock prices, especially in the auto and tech sectors. In this concerning stock market environment, Apple (NASDAQ: AAPL) is a bullish long term investment. Along with being an icon of innovation, it is a leader in market share – 80.4 million Apple smartphones are in the U.S. market alone or 46% of the U.S. market. As a result, investors should look to AAPL which can succeed in a recession due to its strong competitive position, recent business updates, and secure financials.
Apple Stock Predictions – Competitive Position in Technology Sector
Apple belongs to the technology sector within the consumer electronics industry. Relative to its sector which averages PE of 18x, Apple has good value based on earnings with a PE of 17.6x. Furthermore, Apple’s returns showcase its strong position. Apple’s return on assets is 16.81%, compared to the technology average of 4.24% emphasizing that Apple uses its assets more efficiently than the technology sector as a whole. Moreover, Apple’s return on equity is 57.74% vs. the technology average of 10.64% – Apple demonstrates outstanding use of shareholder funds. As a result, compared to its sector, Apple is a stable and efficient investment.
Apple Business Growth Overview
Apple Inc. was founded in 1977. It designs, manufactures, and markets products including smartphones (iPhones), tables (iPads), and personal computers (Macs). It also sells services like iCloud which provides cloud storage, Apple Pay which provides cashless payment, and Apple TV. Along with recent releases like the July 23rd, 2019 operating system update and improving iPhone sales in China, Apple’s settlement with Qualcomm, upcoming purchase of Intel, and 2020 product lineup will continue to drive its growth.
On August 19th, 2019, Apple launched its Apple Card for all iPhone users. The Apple Card is digital-first credit card with no fees including annual, penalty, or transaction fees. Like many competitors, Apple also offers cashback bonuses. For instance, Apple offers 3% cashback on Apple purchases or 2% back on all purchases if the user uses Apple Pay. While others offer higher cashback bonuses such as Amazon which returns 5% for purchases on Amazon.com or more flexibility like Citi’s Double Cash card which returns 2% on all purchases, Apple’s advantage is its ease. Cash back is paid right away, instead of waiting until the balance is paid.
Early Apple card users have found that the card’s ease of use also pertains to the application process. New users can apply and receive the digital card within five minutes. Moreover, they explain that the Apple wallet clearly tracks transactions. It’s also important to note Apple’s focus on security: the card itself lacks numbers, storing each number in the owner’s iPhone Secure Element instead. As a result, Apple card users may have an easier time avoiding fraudulent transactions. The Apple Card highlights Apple’s growing innovation in services and wearables.
Apple Financial Position Analysis
Apple’s financials demonstrate why it is likely to be a bullish long-term investment. Apple’s expected revenue growth is 2.4%, exceeding the tech industry revenue growth expectation of 4.1%. Moreover, year on year earnings growth has been positive over the five years. Current annual income from dividends is 1.4%, and this value is also expected to increase to 1.51% by next year.
Apple’s balance sheet indicates the health of this investment. Dividends paid are well covered by earnings (4x coverage) as are dividends after three years (expected 4.1x coverage). Apple earns more interest than it pays, so coverage of interest payments is not a concern. Furthermore, debt is well covered by operated cashing flow. Coverage exceeds 20% of total debt, at a high 63.6%. Apple is also able to meet its short-term commitments with holdings of cash and short term assets. Overall, Apple has a low level of unsold assets and debt is covered by short term assets with assets at 1.2x debt.
Analysts agree that Apple is a safe investment. In total, 11 analysts rated Apple as a strong buy, 21 rated Apple as a buy, and 6 rated Apple as a hold. Apple’s current price is $205.70; analysts have AAPL stock predictions at an average price target of $223.74 and a high of $270.
Conclusion: Apple Stock Prediction
Apple is currently trading at $205.70 a share, approaching July 31st’s year-to-date high of $213.04. While the markets as a whole including the Technology sector may struggle as recession fears rise, Apple’s competitive position, innovation including the new card, and secure financials will secure its growth. As a result, analysts have a bullish outlook for Apple at the average price target of $223.74.
Current I Know First Forecast for Apple Stock
I Know First’s machine learning algorithm has a positive AAPL stock prediction. The stock is bullish over all time horizons. For the 1-year horizon, the signal is strongest at 212.44 with a predictability indicator of 0.69.
Past I Know First Success with Apple Stock Predictions
On December 28th, 2018 I Know First published a bullish forecast for AAPL. Since then, the stock price has risen 31.62%, highlighting another success of I Know First’s algorithm.
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