Will iPhone Revenue Boost Apple (AAPL) Stock? - Zacks Investment Research

All eyes are connected Apple (AAPL - Free Report) arsenic it is acceptable to study its fiscal 4th fourth net Thursday, October 27. Diversity and enlargement successful its paid services person helped boost the company’s apical and bottommost lines arsenic AAPL banal has outperformed the Nasdaq this year. AAPL has besides outperformed the broader market. 

Similar to different large tech giants similar Alphabet (GOOGL - Free Report) and Amazon (AMZN - Free Report) , Apple has continued to innovate. Apple’s iCloud services, App store, Apple Music, Apple Pay, integer content, and licensing person expanded the company’s gross streams.

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Despite the expansion, Apple’s concern is inactive centered astir its flagship iPhone. While diversification among its businesses has been rewarding, going into its fiscal Q4 net a beardown boost from its iPhone gross could assistance the banal spell higher.

This volition beryllium particularly existent amid overmuch uncertainty successful the marketplace and treacherous operating environments for exertion companies. The quality to amusement an summation successful iPhone gross volition surely beryllium noted by Wall Street and get investors optimistic astir the banal due to the fact that income for galore products are declining amid specified a precocious inflationary environment.

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iPhone gross deserves immoderate of the recognition for AAPL outperforming the Nasdaq this twelvemonth arsenic galore exertion stocks person suffered. From the illustration supra we tin spot that the income surprises for the iPhone person decreased but person inactive been affirmative contempt the economy.

iPhone gross has been up successful the past 2 quarters, giving AAPL banal immoderate assistance successful its past 2 net beats. This besides helped the banal enactment afloat during the 2nd 4th arsenic ostentation concerns continued.

Last quarter, iPhone gross was $40.6 billion, up 3%. Investors volition anticipation this continues, with the Zacks Estimate for iPhone gross during the existent 4th astatine $42.7 cardinal and astir fractional of the company's full revenue. This would besides beryllium a 10% summation and should springiness the company’s fiscal Q4 net a bully boost.

Fiscal Q4 Outlook

The Zacks Consensus Estimate for Apple’s fiscal Q4 net is $1.26 a share, which would correspond a 1% summation from Q4 2021. Sales for Q4 are expected to beryllium up 6% astatine $88.47 billion. Earnings estimates for the play person gone down from $1.31 astatine the opening of the 4th but person started to emergence again implicit the past week.

Year implicit year, AAPL net are expected to emergence 9% successful 2022 and different 6% successful FY23 astatine $6.50 per share. Top enactment maturation is besides expected, with income acceptable to beryllium up 7% this twelvemonth and different 5% successful FY23 to $412.57 billion.

Performance & Valuation

Apple is down -15% YTD to outperform the S&P 500’s -19% and the Nasdaq’s -28%. Even better, implicit the past decade, AAPL is up +631% to crush the benchmark and the Nasdaq.

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AAPL has a P/E of 23.4X. This is good supra the manufacture mean of 6.7X. However, Wall Street has historically been consenting to wage a premium for Apple banal for its maturation prospects, innovation, and manufacture dominance. AAPL trades astatine a discount to its decade-high of 38.6X and is somewhat supra the median of 15.5X. And AAPL’s terms per stock mightiness beryllium charismatic to immoderate considering the banal is 2 years removed from a 4-1 divided successful 2020, trading astatine astir $150 a share.

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Bottom Line

iPhone gross could play a immense relation successful AAPL posting different net bushed amid economical uncertainty. Revenue from the iPhone has traditionally been the company’s breadstuff and food and showing spot successful this conception could beryllium a catalyst for Apple banal and boost capitalist optimism.

AAPL presently lands a Zacks Rank #3 (Hold). Investors whitethorn privation to see companies with bully currency travel and stronger equilibrium sheets to enactment themselves during economical downturns. Apple fits this measure and does connection an annualized dividend output of 0.60% astatine $0.92 per share. And the mean Zacks Price people offers 21% upside from existent levels.