If that’s the case (and history shows it’s likely), Apple will produce compounded earnings-per-share growth of 4% — and that’s from the buybacks alone. The company’s increasing focus on services and wearables over the past several years, coupled with its strong online sales channel, gave Apple a lifeline, even as many other retailers struggled with weak demand. Apple split its stock near the peak of the dot-com bubble. Also of note, Apple announced a 4-for-1 stock split for the end of August. Analysts expect Apple revenue to tread water this year, with sales growing just 1%, though estimates are much more bullish for 2021, with revenue expected to grow more than 12%. One of the more compelling potential drivers for Apple in the near term is the ongoing shift to the next generation of mobile technology, commonly called 5G.
Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not own a position in any of the aforementioned securities. But, if you exclude that one anomaly, stock splits have historically powered 30%-plus gains in AAPL stock.
Should You Buy Apple Stock After Its August Stock Split?
Consumers weren’t supposed to be buying iPhones, Macs, iPads and Apple Watches.
- The stock currently sells for about 29 times earnings, while the average for the S&P 500 sits at about 23.
- It also highlights several of the catalysts that will help drive Apple’s future growth.
- The evidence is clear that Apple’s ecosystem is as sticky as ever, as evidenced by the strong growth of its services.
- The coming upgrade cycle could result in as many as 350 million iPhone upgrades in the coming year, according to Wedbush analyst Dan Ives, driving Apple stock even higher.
After the June 2014 split, the stock powered 38% higher over the following year. Historically, stock splits have been a catalyst for AAPL stock outperformance. Investors cheered the announcement that Apple would split its stock in late August, thereby essentially turning this $400 stock into a $100 stock through the issuance of new shares. Apple stock isn’t the screaming bargain it was just a couple of months ago.
Blue-Chip Stocks to Buy at an All-Time Low in June
Yet underlying these tepid results were indicators of what the future may hold. The company delivered record quarterly results from Apple retail, powered by strong growth from its online store. It also coaxed a quarterly record out of its wearables, home, and accessories segment, while generating an all-time record from its services segment. This minimized the damage from the pandemic, helping Apple keep its head above water. It also highlights several of the catalysts that will help drive Apple’s future growth. Bulls will note that stock splits are normally a good thing for stocks, especially for AAPL stock.
- This minimized the damage from the pandemic, helping Apple keep its head above water.
- Following the February 2005 split, AAPL stock surged 53% higher over the subsequent 12 months.
- Meanwhile, Mac revenues rose 22% and iPad revenues rose 31%, on the back of work-from-home and stay-at-home tailwinds.
- Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
- Remember, this was the quarter which included the months of April, May and June.
That fact, coupled with the stock split, makes the bull thesis on AAPL stock over the next 12 months look quite compelling. When the stock split back in June 1987, AAPL stock rose 8% over the following 12 months. Following the February 2005 split, AAPL stock surged 53% higher over the subsequent 12 months.
Good Upside Potential in Apple Stock
A stock split plus favorable growth catalysts in 2021 will push shares higher over the next 12 months. But valuation friction will ultimately prevent those gains from hitting the 30%-plus mark. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego.
Apple reported quarterly revenue of $58.3 billion, edging up 1% compared to the year-ago quarter, while earnings of $2.55 per share increased 4%. The evidence is clear that Apple’s ecosystem is as sticky as ever, as evidenced by the strong growth of its services. Its customers are equally loyal and with the latest line of iPhones just around the corner, the future has never looked brighter for Apple — or its investors. Earlier this year, Apple revealed it has an installed base of more than 1.5 billion active devices worldwide, and while the company didn’t provide an update for the iPhone, estimates put that number at close to 1 billion. The coming upgrade cycle could result in as many as 350 million iPhone upgrades in the coming year, according to Wedbush analyst Dan Ives, driving Apple stock even higher.
Will the Rest of the Market Catch Up?
Revenues rose 15% year-over-year, thanks to strong performance from the App Store and Apple’s various subscription services. Apple now has 550 million paid subscriptions across its platform, up from just 130 million a year ago. Remember, this was the quarter which included the months of April, May and June. In those months, the global economy was largely shut down.
Apple has split its stock four times in its history as a public company. Additionally, the company has a laundry list of potential catalysts that could https://forexarticles.net/what-is-sax-bank-4/ drive the stock higher. Some even believe Apple’s market cap could close in at $2 trillion later this year, about 25% higher than its current value.
The stock is already up 25% so far this year, even as the broader market treads water. Still, that’s good return in a zero-rate world, especially when it’s coming from the world’s biggest and most stable company. Meanwhile, Mac revenues rose 22% and iPad revenues rose 31%, on the back of work-from-home and stay-at-home tailwinds.
The stock currently sells for about 29 times earnings, while the average for the S&P 500 sits at about 23. These metrics have been driven higher by the stock’s impressive recovery since bottoming out in late March. Another factor that can’t be ignored is Apple’s relentless share buyback program. Just last week, RBC Capital’s Robert Muller highlighted the company’s capital allocation plan. “Apple remains in a league of its own when it comes to share repurchases,” he said in a note to clients. Muller believes Apple will continue to buy back stock of about $70 billion annually, similar to its recent rate.
The seminal investing question
At the same time, the Services business should sustain robust growth, powered mostly by expansion of Apple’s newest subscription services, such as Apple TV+. Potential consumer behavior normalization in 2021 should also propel strong growth throughout the entire hardware product portfolio, powering strong Mac, iPad and Wearables growth. IPhone revenues rose 2% in the quarter, powered by rebounding demand in May and June, as well as the new, low-price iPhone SE launch. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Apple (AAPL 0.84%) stock has been something of a dynamo over the past year, gaining more than 84%, and it’s currently the market cap leader among all publicly traded stocks in the U.S., at more than $1.58 trillion.
Over the past four quarters, the segment has generated more than $50 billion in revenue, amounting to nearly 19% of Apple’s total sales — and that could be just the beginning. Evercore ISI analyst Amit Daryanani recently calculated that Apple’s services business could double by late 2024, after having doubled over the previous four years. Services is also a higher-margin business, so it will likely boost Apple’s bottom line in the process. Apple reported is fiscal second quarter results in late April, as investors were beginning to get past some of the uncertainty resulting from the pandemic.