What Does Apple Inc.'s (NASDAQ:AAPL) Share Price Indicate?

By
Simply Wall St
Published
June 08, 2022
NasdaqGS:AAPL
Source: Shutterstock

Apple Inc. (NASDAQ:AAPL) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$179 at one point, and dropping to the lows of US$137. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Apple's current trading price of US$149 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Apple’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Apple

What's the opportunity in Apple?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.6% below my intrinsic value, which means if you buy Apple today, you’d be paying a fair price for it. And if you believe the company’s true value is $164.45, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Apple’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Apple look like?

earnings-and-revenue-growth
NasdaqGS:AAPL Earnings and Revenue Growth June 8th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Apple, it is expected to deliver a relatively unexciting earnings growth of 6.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? AAPL’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on AAPL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Apple at this point in time. For example - Apple has 1 warning sign we think you should be aware of.

If you are no longer interested in Apple, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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