Sign InApple Inc. Stock Shows Promising Future Growth Despite Q2 Drop in Smartphone Shipments
Summary
On July 31, 2023, Apple's stock price increased slightly and remained within a stable trading range, with strong financials and a promising future growth outlook due to increased smartphone spending in China, but the recent drop in Q2 smartphone shipments and pending earnings announcement may impact the stock price, making a Hold recommendation appropriate.
1. Overview
The stock under analysis is Apple Inc. (AAPL), traded on the NASDAQ. The company's most recent closing price on July 31, 2023 was $196.45, which indicates an increase of $0.62, or 0.32%, from the previous trading day. The recent price volatility, revealed through a day low of $195.26 and day high of $196.49, represents a relatively stable trading range. This performance is within proximity of Apple's 52-week range of $124.17 and $198.23.
2. Financial Performance
Considering its earnings per share (EPS) of $5.89, it comes as no surprise that Apple is a serious contender within the tech sector. Additionally, its price-to-earnings ratio (PE) is currently 33.35, which is within the average range for companies in its sector. This suggests that the company's shares are reasonably priced based on the company's earning power. The company currently holds a significant market capitalization of $3.09 trillion, evidencing its supremacy in the market.
3. Volume and Market Momentum
The relative strength index (RSI14) at 74 suggests a strong buying impulse. Analogously, the moving average convergence divergence (MACD) three–month trend at 2.08 backs the bullish market sentiment. Furthermore, the AIPL recent trading volume was 37.02 million shares, lower than its average volume of 56.93 million shares.
4. Moving Averages
The stock is trading well above its 200-day moving average of $158.73 and 50-day moving average of $185.30, indicating a strong upward trend.
5. Discounted Cash Flow Analysis
The DCF model provides an estimated intrinsic value of $197.89 for the company, which is above the current price of $196.45. This suggests that the company's stock may be undervalued.
6. Analyst Estimates
The median target price for the shares suggested by analysts is $185, while the high and low targets stand at $250 and $110 respectively.
7. Recent News
Recent news indicates that Apple has witnessed a 24% YoY drop in smartphone shipments in Q2. Nonetheless, consumer spending on smartphones in China has increased, which is a positive sign for Apple. Since China represents a sizable proportion of Apple's customer base, this news may have a favorable impact on the company's future earnings.
In addition to this, the imminent earnings announcement on August 03, 2023, will likely have a significant influence on the stock's near-term performance.
8. Prediction
Given the strong technical indicators and the bullish market sentiment, it is plausible to expect that the stock price may witness a slight increase over the next week. However, keep in mind the pending earnings announcement and its potential to affect the price.
9. Final Evaluation
The company's strong financials, coupled with higher spending on smartphones in key markets like China, point to promising future growth. However, a significant drop in Q2 smartphone shipments could apply pressure. Considering the company’s colossal market cap, above-average DCF value, and robust technical analysis indicators, the recommendation for Apple's stock would be a "Hold." This is because the stock is relatively pricey, but disruptions in smartphone units shipped and upcoming earnings could stir price action.
