When shares of Apple (NASDAQ:AAPL) topped $137.98 in September, stock markets were not in a selling mood at the time. Tesla (NASDAQ:TSLA) had previously announced a stock split and then Apple followed. Novice investors who did not know that the split creates no value bid shares of Apple stock higher.
Although having more stock float increases liquidity and a lower share price will attract smaller investors, Apple needs higher unit iPhone sales. A delay in the iPhone 12 launch hurt last quarter’s result.
This time, the iPhone 12 Mini will reverse the lull in smartphone sales.
AAPL Stock Has Limited Upside
For the next few weeks, Apple is unlikely to reward investors with the same 9% return as the previous week. Valuations are unfavorable as the price-to-earnings ratio approaches 40 times. Investors could buy Microsoft (NASDAQ:MSFT) at the same multiple and get better growth.
Still, Apple is consistently growing services business benefits from high margins. After it bundled its service (such as apps and music), sign-up rates should increase.
Apple shares score a 95/100 on quality, based on its historic margin strength:
AAPL Industry S&P 500 Quality Score 95 58 80 Gross Margin 38.20% 30.50% 28.80% Operating Margin 24.20% 14.30% 12.40% Net Margin 20.90% 12.60% 7.70%
Data from Stock Rover
In the fourth quarter, Apple posted fourth-quarter revenue of $64.7 billion, up 1% from last year. iPhone sales worth $26.44 billion did not meet the $27.73 billion consensus estimate. Due to the pandemic pushing computer sales, Mac sales at $9.03 billion easily exceeded the $7.93 billion consensus.
Value investors will consider Apple’s meager 1% revenue growth rate as too low. Yet, sales did not grow as fast because Apple launched the iPhone 12 models in the current quarter. The holiday season is approaching. Consumers who waited for two phone generations (on iPhone 7 or 8) will want to upgrade to the latest device.