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Apple In spite of the slight growth witnessed by Apple (NASDAQ: AAPL), the company’s share has risen by over 50 percent this year. Revenues in the last 8 quarters grew less than 5%, with the exception of a positive one-year comparable 9% rise in Q1 FY20 and 11% in Q3 FY ’20 with a corresponding Covid-19 bump in production. Then why does the stock rise? Will the inventory of Apple stock price see a correction? Are buyers on Apple’s diminishing returns in the coming years? We respond to any of the following questions.
What’s the price appreciation for Driving Apple?
Apple has improved over two year-on-year revenues by nearly USD 31 billion between FY 17 and FY 19 (fiscal year ended in September). Margins were nearly stable at 21% – delivering an incremental benefit of about $7 billion. However, investors value those advantages more, with Apple’s P / E multiple trailers currently growing from approximately 18 times at the end of 2017 to approximately 39 times its trailing income and 35x its expected profits. We think that Apple stock price multiple expansion points to three wide trends: the pending launch of the 5 G iPhone, solid services growth and a chance that the current volatility will mean that APPEL is treated as a “safe-haven” stock.
Investors should expect what returns to go forward?
Think what Apple would look like before 2025. If income increases by about 40% between the year 20 and 25 years ago (an estimated 7 % annual growth marginally ahead of the average annual growth trend observed in the last two years), powered by the 5 G iPhones, Apple TV+ Streaming and other items such as AirPods, overall sales could increase from about 273 billion dollars to around 384 billion dollars in total. The growth rate of growth will be approximately 40%. Net Profits will also increase by approximately 150 basis points (1.5%) to approximately 22.5%, led by more exclusive device elements and higher services mix, by approximately 50%, Apple’s net sales will rise to $86 billion.
Now, what about the multiple of Apple? We assume it is unlikely that for many reasons Apple stock price will order the 35x number it currently does in 2025. Next, interest rates are very likely to grow by 2025, resulting in lower valuations on wider stock markets. If the economy gets stronger, Apple’s “safe haven” premium will also diminish. The Services sector of Apple-which is being scrutinised against the confidence, may also see cool growth. In this respect, a multiple of approximately 28 times for 2025 is possibly rational. (For the last 10 years, the Apple average P / E ratio was around 16x). You can know income statement at https://www.webull.com/income-statement/nasdaq-aapl .
Disclaimer: The analysis information is for reference only and does not constitute an investment recommendation.