Apple Inc. (NASDAQ:AAPL) just released its latest quarterly results and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 3.9% to hit US$92b. Statutory earnings per share (EPS) came in at US$4.99, some 10.0% above what analysts had expected. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Apple from 39 analysts is for revenues of US$285.2b in 2020, which is a reasonable 6.5% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 9.3% to US$13.86. In the lead-up to this report, analysts had been modelling revenues of US$276.6b and earnings per share (EPS) of US$13.10 in 2020. It looks like there’s been a modest increase in sentiment following the latest results, with analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
With these upgrades, we’re not surprised to see that analysts have lifted their price target 11% to US$325 per share. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values Apple at US$400 per share, while the most bearish prices it at US$167. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It’s clear from the latest estimates that Apple’s rate of growth is expected to accelerate meaningfully, with forecast 6.5% revenue growth noticeably faster than its historical growth of 4.8%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 6.4% next year. Apple is expected to grow at about the same rate as its market, so it’s not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Apple following these results. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Apple going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Apple’s balance sheet, and whether we think Apple is carrying too much debt, for free on our platform here.
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