Apple Just Kicked it Up a Notch

Stock (Symbol)

Apple (AAPL)

Stock Price

$174

Sector

Technology

Data is as of

November 27, 2017

Expected to Report

Jan 29

Company Description

Apple’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. Source: Thomson Financial

Sharek’s Take

Apple’s (AAPL) just kicked profit growth up a notch. Last qtr profits swelled 24% on robust sales growth of 12%. What’s more is profit estimates increased a lot. 2018’s estimate jumped from $10.80 to $11.44. And with qtrly Estimates of 12%, 39%, 32% and 20% profit growth the next 4 qtrs this stock has a lot of wind at its back headed into 2018. This past qtr was outstanding on many levels. Revenue growth was strong in every region and every product in Apple’s lineup outside of the iPhone had double-digit sales growth. AAPL is a safe stock with a 2% yield in addition to a 11% Est. LTG. Management buys back billions in shares and the new iPhone’s should prove to be a catalyst going forward. Plus, foreign exchange expenses are not pulling down profits like they used to. With a P/E of just 15, it is conceivable this stock could rise 25% or more in the coming 12 months. This stock has a lot going for it. AAPL is in the Growth Portfolio and Conservative Growth Portfolio. I will add the stock to the Aggressive Growth Portfolio today.

One Year Chart

TNice profit growht acceleration the last 12 months, and even though the move higher was HUGE the stock still has a P/E of only 15. Warren Buffett thinks this stock should garner a P/E in the 20s. If that were to occur this stock would go on a serious run higher — as long as estimates stayed consistent. These numbers look great, and although the stock is much higher than it was a year-ago, this is a completely different situation numbers-wise.

Fair Value

My Fair Value is getting bumped up from 16x earnings to 18x. But I can envision the stock getting a P/E of 20 in the future. And 2018 profit estimates have increased during the last 4 qtrs from $10.13 to $10.49, $10.80 and $11.44 the last 4 qtrs. These expectations shown here are probably too low.

Bottom Line

Apple is extended on the ten-year chart, which makes me think we should be cautious here. But with profits expected to climb 24% this fiscal year (ending Sept 30) and a P/E of just 15, I think this stock could go on a parabolic run. Also, AAPL’s solid results should help the stock market in general, as its is the largest stock in the S&P 500. I will add AAPL to the the Aggressive Growth Portfolio today. The stock is also in the Growth Portfolio and ranks 12th in the Power Rankings. AAPL ranks 2nd in the Conservative Growth Portfolio Power Rankings.