Apple, Inc. (AAPL) is the biggest company in the world in terms of market capitalization. It is the fastest-growing U.S.-based company in history and is ranked #3 on the 2021 Fortune 500 list. However, the stock has dipped 0.6% in price over the past month and 3.9% over the past five days. This can be attributed to a recent court ruling that prevents the  company from compelling its developers to use its in-app payment system, which deducts 30% commissions on sales.

AAPL’s revenues are expected to take a big hit because of the ruling, because developer commissions account for a large proportion of its Apple Pay segment earnings. The tech behemoth is expected to shrug off the losses soon through new product launches and service offerings, however.

AAPL launched its highly anticipated iPhone 13, Apple Watch Series 7, and iPad mini on September14. In addition, AAPL acquired classical music streaming service Primephonic on August 30, which is expected to improve its iTunes subscriber base in the near term.

Here’s what could shape AAPL’s performance in the near term:

Strong Financials

AAPL’s trailing-12-month revenues came in at $347.16 billion, reflecting a 26.8% rise year-over-year. Its $142.35 billion trailing-12-month gross profit translates to a 41.01% margin. The company’s EBITDA and net income stood at $110.94 billion and $86.80 billion, respectively. Its trailing-12-month EBITDA margin and return on sales of 31.96% and 25%, respectively, are significantly higher than the 14.7% and 6.22% industry averages. AAPL’s trailing-12-month EPS increased 55.1% year-over-year to $5.11.

The company’s ROE, ROA, and ROTC of 127.12%, 26.32%, and 31.69%, respectively, are significantly higher than the 8.31%, 3.59%, and 4.95% industry averages.

Rosy Growth Prospects

Analysts expect AAPL’s revenues and EPS to rise 31.2% and 68.5%, respectively, year-over-year to $84.90 billion and $1.23 in the current quarter (ending September 2021). In addition, the company’s revenue is expected to rise 33.5% and 3.8% in fiscal 2021 and fiscal 2022, respectively.

A $5.59 consensus EPS estimate for its fiscal year 2021 indicates a 70.4% improvement year-over-year. The Street expects its EPS to rise 2.1% from the same period last year to $5.71 in 2022. Furthermore, AAPL’s EPS is expected to increase at a 19.6% CAGR over the next five years.

Consensus Rating and Price Target Indicate Potential Upside

Of the 24 Wall Street analysts that rated AAPL, 18 rated it Buy, while six rated it Hold. The  $168.29 12-month median price target  indicates a 12.9% potential upside from its   $149.15 last closing price. The price targets range from a low of $140.00 to a high of $185.00.

Favorable POWR Ratings

AAPL has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Sentiment and a B for Quality. AAPL’s promising growth prospects justify the Sentiment grade. In addition, the company’s 25% net income margin is 302% higher than the 6.22% industry average, which is in sync with the Quality grade.

Of the 46 stocks in the B-rated Technology – Hardware industry, AAPL is ranked #21.

In addition to the grades we’ve highlighted, one  can view AAPL ratings for Growth, Value, Stability, and Momentum here.

Bottom Line

AAPL is one of the most valuable brands in the world and enjoys substantial customer loyalty. In addition, the company has recently been exploring other growth avenues  and has plans to enter the autonomous vehicle space in  2024. Furthermore, with negative net debt and strong cash flows, AAPL’s trailing-12-month ROE is higher than its industry peers. Thus, we think investors should buy the dip to maximize their returns.

How Does Apple (AAPL) Stack Up Against its Peers?

While AAPL has a B rating in our proprietary rating system, one  might want to consider taking a look at its industry peers, Canon, Inc. (CAJ) and Seiko Epson Corporation (SEKEY), which have an A (Strong Buy) rating.

AAPL shares fell $0.01 (-0.01%) in premarket trading Friday. Year-to-date, AAPL has gained 12.66%, versus a 20.39% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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