The Apple Stock Prediction article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.
- Apple’s stock is +14.4% since my December 21, 2020, take-your-profits recommendation.
- I am AAPL as a buy because of its big beat on Q3 numbers.
- For its third quarter, Apple’s EPS was $1.30 and its revenue was $81.4 billion. These figures top Wall Street’s estimates of $1.01 EPS on sales of $73.5 billion.
- Stronger sales and growing net income fortify Apple’s eight consecutive years of dividend growth.
- The more infectious variant of the COVID-19 virus is an indirect tailwind to Apple’s Services business. The Services segment’s Q3 revenue was $17.5 billion (+32% Y/Y).
I am reversing the profit-taking sell rating I gave Apple (AAPL) last December 21. The big beat on Apple’s third-quarter EPS and revenue convinced me we should go long on AAPL again. Apple’s Q3 revenue was $81.4 billion (+36% Y/Y), topping analysts’ estimate of $73.5 billion. The third-quarter net income was $21.74 billion, giving AAPL a Q3 EPS of $1.30. This is notably higher than analysts’ average estimate of $1.01. The chart below shows some investors are profit-taking after the July 27 ER. Go contrarian and buy the AAPL shares they are dumping.
Seeking Alpha’s Quantitative Rating AI’s algorithm is Neutral on AAPL. My God-given natural intelligence told me to be Bullish on Apple. Seeking Alpha’s Quant AI is Neutral on AAPL because it does not like the stocks D- grade in Value and D+ in Growth. My takeaway is that the A+ grade in Profitability makes AAPL a Strong Buy. Any company that can deliver $21.74 billion in quarterly net income and a 23.45% TTM net income margin is a Strong Buy.
My Strong Buy rating is also thanks to the AI stock prediction system of I Know First. Unlike Seeking Alpha’s Quant AI, the 1-year forecast trend score of AAPL from I Know First is still bullish. I have a higher faith in I Know First’s neural network programmers.
Apple stock prediction: Stronger Hardware Sales Fuels Apple’s Growing Dividends & Share Repurchases
My bullish recommendation for AAPL is thanks to its Q3 segments’ numbers. The high-margin hardware business model of Apple is still viable. Third-quarter results showed iPhone revenue was $39.57 billion, $8.24 billion for Mac, $7.37 billion for the iPad, and $8.8 billion for Wearables, Home, and Accessories. Compare these numbers to Q3 2020’s iPhone $26.42 billion, $7.08 billion Mac, and $6.58 billion Mac. Sales of Apple’s hardware products are obviously still on the double-digit year-over-year growth momentum.
Growing sales of high-margin Apple hardware products ultimately lead to consistent profitability. Being a consistent high-profit company, Apple can continue increasing its annual dividend payments. AAPL’s price can get more expensive once income-focused investors realize Apple will keep on increasing its dividend payments and share buybacks. Management is stingy, but Apple has increased its dividend payments for the last eight years.
The growing hardware sales of Apple (and the high-margin profit from them) also allows Apple to continuously do multi-billion share buybacks. As of March 31, 2021, Apple spent $17.99 billion. This is a hefty follow-up on the $24.77 billion that Apple spent on share buyback during Q4 2020. The massive quarterly budget of Apple for share buybacks assures us that AAPL is not going to fall below $120.
Apple can afford to spend more than $15 billion in quarterly buybacks because it still has $66.83 billion in total cash. Apple also touts a net operating cash flow of $99.59 billion. Big and small short-sellers are not going to attack AAPL. Apple is extremely rich and profitable.
The chart above should also justify the high valuation ratios of AAPL when compared to other hardware-centric companies like (DELL) or HP Inc. (HPQ). High profitability has given Apple a strong balance sheet and a massive levered free cash flow of $80.12 billion. This feat is something that even Xiaomi (XIACF) (the “Apple of China) cannot yet replicate. AAPL is no longer perceived as a growth stock but it still has higher valuation ratios than XIACF.
AAPL is still cheaper though when compared against growth-stock darlings like Amazon (AMZN) and Tesla (TSLA). Tesla’s net income margin is very low at 3.18%. The same could be said for AMZN’s net income margin of 6.42%.
The popular slow-growth perception for Apple should change soon. The fast-growing $17.5 billion/quarter Services segment is a very strong growth driver for Apple. The monopoly of Apple on in-app purchases of iOS devices owners will only get more profitable. People are now inspired to learn-from-home and work-from-home. We are now afraid to go out because of the Alpha, Beta, Delta variants of COVID-19. The more people that stay or work from home, the more they will be tempted to spend more on iOS games, books, streaming shows, and apps.
AAPL is a buy because iOS device owners spent $41.5 billion on Apple’s app store in 1H 2021. This is +24.8% higher than 1H 2020 spending of $34 billion.
The high-margin approach of Apple in selling its iOS hardware products is still valued higher than the low-5%-margin-on-hardware strategy of Xiaomi. Lastly, AAPL is a very efficient company. Apple’s hardware-centric focus still gives it a higher operating margin than advertising and search engine monopolist Google (GOOGL), 27.3% versus 25.3%.
I hope this article’s salient points and the bullish 1-year trend score that I Know First has for AAPL will convince you to go long on Apple. AAPL can trade higher than $155 if the coming Q4 2021 delivers EPS of $1.40. Thank you for reading and evaluating the investment thesis of this article.
Past Success With AAPL Stock Forecast
I Know First has been bullish on Apple stock prediction in the past. On July 10, 2020, the I Know First algorithm issued a forecast for Apple stock price and recommended Apple as one of the best consumer stocks to buy. The AI-driven Apple stock prediction was successful on a 1 year time horizon resulting in more than 51.66%.
Here at I Know First, our AI-based stock forecast algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. The database used is 100% historical data free from human-derived assumptions and is constantly evolving with newly added data and adapting to changing market situations. Today, we are producing daily forecasts for over 10,500 assets such as forex forecasts, as well as gold predictions, while also providing the latest Apple stock news. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.
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