Is It Time to Buy Apple (AAPL)? What is the Apple Stock Forecast?

Is it time to buy Apple shares? I’m going to get to the point quickly in this post by saying in my opinion the apple stock price doesn’t offer great value at these prices. That is not say I’d sell if I owned the stock … I just wouldn’t buy it here. 

I’d be a buyer below $130! 

As I write this blog Apple is trading at circa $147.  

Let me go through a fundamental analysis in order to get the Apple stock forecast

Anytime you consider investing  into a company you want to see a track record of sales and profit (earnings) growth. Apple is a cash cow and nobody can deny that. It certainly has grown over the last 3 years but does this growth warrant and investment in apple shares now?

Let’s have a look: 

• Sales Growth: Apple has driven annual revenue growth from $229 billion to $365 billion over the past 5 years. That is an average annual sales growth rate of just over 20% per annum. Excellent for a company of Apple’s size… remember it is one of the largest companies in the world so it becomes more challenging to achieve sales growth over the 10% level.
• Net Income Growth: Net income has grown from $48 Billion to $94 Billion over that period which is approximately 20% annual growth in profits over that period of time. Again that is impressive for a company of Apple’s size. 

• Future Sales Growth Expectations: Apple is expected to deliver sales growth of 4% between 2022 and 2023. That is quite a slowdown in versus the previous number of years. 
• Future Net Profit growth expectations: Apple is expected to deliver 4% between 2022 and 2023. Again a marked slowdown on growth rates. 

Apple is currently valued at $2.4 trillion! Yes, that’s trillion! 

1. Price to Earnings: It is trading at a Price to Earnings ratio (PE) of 26 based on trailing 12 months eps. The company is trading at 24 times 2023 earnings expectations. To me this is about fairly valued but offers little upside. 
2. Price to Sales: Apple is currently trading at a Price to Sales ratio of 6.64. Forecasted sales in 2023 are currently at $401 billion. The company has 16.4 billion shares outstanding. This equates to forecasted sales per share of 24.45. Multiplying 24.45 by 6.64 gives you a $162 target price on the stock. Again a small amount of upside from here.

I have concluded that Apple is not exactly a buy or a sell at these levels but the above valuations are based on current multiples of sales and earnings. Remember the growth rate for Apple going forward is forecasted to slow down substantially. Will apple continue to trade at these higher valuation multiples?

We must also remember the role of the following in recent stocks prices:

1. The Federal Reserve: The Fed has basically underwritten the stock market (for now) and investors just don’t see any risk in holding stocks. High Yield corporate debt is at its lowest level in history as the Fed continues to buy corporate bonds keeping the liquidity high. But to me this is one giant experiment which nobody truly knows what can go wrong yet… surely excessive debt has to catch up on us some day?
2. Bond Yields: Government Bonds are simply un-investable..rates are at historic lows and QE continues. This makes stocks more attractive to the safer government bond. 

In summary, Apple is a great company, I love their products but their share price doesn’t warrant investment here. Nor would I sell it. With the cash pile that Apple has and all of their secret projects you just do not know what will come next for the company. 

I’d be a buyer closer to when the Apple share price reaches $130.

Happy Investing 

Stephen 

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