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Apple Inc.'s stock is currently trading near its year-high at $193.73, with strong investor confidence in its future earnings potential, although potential risks of anti-trust proceedings and supply chain issues should be considered. (July 18, 2023)
Fundamental Analysis
Apple Inc.'s (AAPL) is currently trading at a last-close price of $193.73 on July 18, 2023. Its year-to-date trading range has varied between a low of $124.17 and a high of $194.48, with the current price per share relatively close to the year's high. Apple commands a market capitalization of $3.05 trillion, placing it firmly in the mega-cap stock range. Its shares outstanding total an impressive 15.73 billion.
Looking at earnings, Apple's reported EPS is a robust $5.89, and with a price-to-earnings ratio of 32.89, the stock is priced richly compared to earnings, suggesting strong investor confidence in Apple's future earnings potential. The next earnings announcement is scheduled for August 3, 2023.
However, the company may be facing turbulent times ahead. Recent news reports implicate Apple, alongside Amazon, in an alleged collusion to suppress competition in Spain in the iPhone market. These accusations, if proven, could potentially impact Apple's reputation and lead to financial penalties.
Another potential trouble spot is the global chip shortage, which affects Apple’s component supply chain. Apple's connection with Taiwan Semiconductor Manufacturing Co., as highlighted in recent news, could be crucial to navigating this issue. If TSMC manages to succeed amidst today's difficult semiconductor environment, Apple could benefit significantly.
On a positive note, Apple appears to be focusing intensively on India. As per recent reports, Apple is heavily invested in the Indian market, clearly eyeing the country's economic trajectory, which is projected to surpass the US by 2075.
Technical Analysis
Technical charts for AAPL indicate that the stock is currently trading above both its 50-day moving average of $181.40 and its 200-day moving average of $156.47. This shows consistent bullish momentum in recent months.
Indicators like the RSI and MACD further support this bullish sentiment. With an RSI of 65, the stock is nearing overbought territory, but remains within tolerable limits. Meanwhile, the 3-month MACD reading of 3.68 suggests positive price momentum.
Both the RSI and MACD should be monitored closely. If the RSI moves further above 70, it may signal that the stock is overbought and could be due for a pullback. As for MACD, if the MACD line crosses below the Signal Line, that may indicate a bearish price reversal.
Outlook and Recommendation
Given the projected discounted cash flow (DCF) valuation of $195.18, Apple's shares appear to be fairly valued at their current price. Moreover, other analyst consensus estimates suggest a median target price of $185, indicating that the stock could be slightly overvalued at present.
In light of its robust fundamentals, ongoing bullish momentum seen in the technical charts, and decent valuation, the potential risks of anti-trust proceedings and supply chain issues are duly recognized, but do not fundamentally alter a positive perspective on the stock.
With this information, Apple's stock is considered an investment to Hold, given the slightly overvalued state based on the median price target and potential risk factors. However, the general outlook remains positive for the company, and investors should be ready to move should Apple's strategic push into India and potential resilience amidst supply chain issues begin to bear fruit.
