Apple (AAPL) Earnings Analysis: Buy or Watch for Gains?

NASDAQ: AAPL | Apple Inc. News, Ratings, and Charts

AAPL – Tech titan Apple (AAPL) kicked off 2024 with legal challenges, weakening demand in China, and heightened regulatory scrutiny. However, as anticipation builds for the company’s upcoming fiscal 2024 first-quarter earnings, should investors buy or hold the stock? Keep reading to find out….

Tech giant Apple Inc. (AAPL) is all set to disclose its fiscal 2024 first quarter results on Thursday, February 1, 2024. Wall Street forecasts AAPL’s first-quarter revenue to experience a marginal year-over-year increase to $118.26 billion, while its EPS for the same quarter is anticipated to witness a notable 11.9% year-over-year surge to $2.10. Meanwhile, AAPL’s fiscal 2023 fourth-quarter results painted a mixed picture.

Although the company exceeded revenue and EPS estimates for the fourth quarter, its Mac revenue of $7.61 billion fell short of analysts’ expectations, which were pegged at $8.63 billion. Similarly, its services revenue of $22.31 billion was slightly below the estimated $21.35 billion. On a brighter note, its revenue from iPhone sales met Wall Street expectations.

AAPL is navigating a complex landscape this year, marked by legal disputes and intensified regulatory scrutiny from the Biden administration and the European Union (EU) authorities.

The Biden administration is intensifying scrutiny on AAPL and other tech giants, particularly regarding the dominance of its App Store. Concurrently, legislative efforts in the EU aimed at curbing the power of Big Tech are compelling changes in AAPL’s operations. 

As part of its efforts to adhere to the EU’s forthcoming Digital Markets Act (DMA), AAPL will soon permit software developers to distribute their apps to AAPL devices through alternative stores. Beginning this March, developers can offer alternative iPhone app stores and avoid AAPL’s 30% in-app payment commission.

Adding to the company’s mounting concerns, AAPL’s shares tumbled last week after Microsoft Corporation (MSFT) surpassed the $3 trillion market cap, becoming the world’s most valuable publicly traded company, dethroning AAPL from the top spot for the first time since 2021 after the iPhone maker’s shares experienced a sluggish start to the year on growing concerns over demand.

AAPL has been wrestling with declining demand in China for its flagship product, the iPhone, which serves as its primary revenue driver due to the country’s sluggish economic recovery from the pandemic. Currently, AAPL boasts a $2.97 trillion market cap, marginally lower than MSFT’s $3.05 trillion.

Nevertheless, on the brighter side, the launch of AAPL’s new revolutionary entertainment offering, Apple Vision Pro, on February 2, 2024, could bolster the company’s prospects. Greg Joswiak, AAPL’s Senior Vice President of Worldwide Marketing, described Apple Vision Pro as the ultimate entertainment device, offering a unique experience unlike anything seen before.

Furthermore, on November 13, 2023, AAPL paid its shareholders a quarterly dividend of $0.24 per share. The company’s annual dividend of $0.96 translates to a 0.50% yield on the prevailing price, while its four-year average dividend yield is 0.64%. Its dividend payouts have grown at CAGRs of 5.6% and 6.2% over the past three and five years, respectively.

AAPL’s shares have rallied 13.9% over the past three months but plunged marginally over the past month to close the last trading session at $191.73.

Here are the fundamental aspects of AAPL that could influence its performance in the near term:

Mixed Financials

For the fiscal 2023 fourth quarter, which ended on September 30, 2023, AAPL’s total net sales declined marginally year-over-year to $89.50 billion. However, its gross margin improved 6.1% from the year-ago value to $40.43 billion. 

Furthermore, the company’s net income and EPS amounted to $22.96 billion and $1.46, up 10.8% and 13.2% from the prior-year quarter, respectively. On the other hand, during the same quarter, the company’s total operating expenses rose 1.9% from the year-ago value to $13.46 billion.

High Profitability

AAPL’s trailing-12-month EBIT margin of 28.82% is 518.9% higher than the industry average of 4.82%. Also, its trailing-12-month net income margin of 25.31% is substantially higher than the 2.05% industry average.

Furthermore, the stock’s trailing-12-month levered FCF and EBITDA margins of 21.44% and 32.83% are 141.9% and 255.4% higher than the 8.86% and 9.24% industry averages, respectively.

Stretched Valuation

In terms of forward non-GAAP PEG, AAPL’s 3.03x is 46.1% higher than the industry average of 2.08x. Also, its forward EV/Sales multiple of 7.41 is 152.9% higher than the 2.93x industry average. Likewise, the stock’s forward Price/Sales multiple of 7.51 is 155.9% higher than the 2.93x industry average.

POWR Ratings Reflect Uncertainty

AAPL’s fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to Neutral in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AAPL has a C grade for Growth, justified by its mixed financial performance in the fourth quarter. Meanwhile, AAPL’s D grade for Value is consistent with its stretched valuation metrics. On the other hand, the stock’s A grade for Quality is in sync with its higher-than-industry profitability metrics.

In the A-rated Technology – Hardware industry, AAPL is ranked #22 out of the 36 stocks.    

Beyond what we’ve stated above, we have also rated the stock for Momentum, Stability, and Sentiment. Get all ratings of AAPL here.

Bottom Line

While AAPL’s efforts to comply with EU regulations and the launch of its much-anticipated product, Apple Vision Pro, could brighten the company’s long-term prospects, its ongoing legal battles and subdued demand for iPhones in China remain significant hurdles for the company.

Additionally, AAPL’s mixed fundamentals underscore the need for exercising caution. Thus, it might be prudent for investors to await a more opportune entry point within the stock.

How Does Apple Inc. (AAPL) Stack Up Against Its Peers?

While AAPL has an overall grade of C, equating to a Neutral rating, you may check out these other stocks within the Technology – Hardware industry: AstroNova, Inc. (ALOT), HP Inc. (HPQ), and Vtech Holdings Limited (VTKLY), carrying A (Strong Buy) ratings. To explore more Technology – Hardware stocks, click here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

AAPL shares were trading at $188.10 per share on Tuesday afternoon, down $3.63 (-1.89%). Year-to-date, AAPL has declined -2.30%, versus a 3.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Mukherjee

Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
AAPLGet RatingGet RatingGet Rating
ALOTGet RatingGet RatingGet Rating
HPQGet RatingGet RatingGet Rating
VTKLYGet RatingGet RatingGet Rating
MSFTGet RatingGet RatingGet Rating

Most Popular Stories on

These 5 Economic Reports Hold the Key for Stocks

Thanks to signs of easing inflation in May we have enjoyed a rally for stocks with the S&P 500 (SPY) making new all time highs. What happens next for stocks very much is tied to the results for these 5 upcoming economic reports. Steve Reitmeister previews these announcements with keys to what stocks do next. Read it all in the full article below...

4 Software Stocks Primed for Major Upside in 2024

The software industry is thriving, buoyed by digital transformation, soaring demand for cloud solutions, and the integration of advanced technologies like AI and ML, presenting lucrative opportunities for savvy investors. So, let’s look at tech stocks SS&C Technologies (SSNC), Informatica (INFA), Verint Systems (VRNT), and Yext (YEXT) poised for significant upside in 2024. Read on…

3 Pharma Stocks Primed for May Investment Opportunities

The pharma industry is poised for tremendous growth driven by surging healthcare needs, the introduction of groundbreaking medications, and relentless technological innovation. Hence, quality pharma stocks Collegium Pharmaceutical (COLL), Green Thumb Industries (GTBIF), and Bristol-Myers Squibb (BMY) emerge as prime investment options this month. Read more…

3 Bargain Internet Stock Buys for Savvy Investors

The increased internet penetration is reshaping various industries, driving digital transformation, connectivity, and access to services like e-commerce, remote work, and online entertainment. Thus, robust internet stocks Jamf Holding (JAMF), Upwork (UPWK), and TrueCar (TRUE), which are trading at discounts to their peers, could be ideal buys. Keep reading…

Will Stocks Continue to Rise...Or Time for Rug Pull?

It’s hard not to celebrate each new high for the S&P 500 (SPY). Yet with high inflation not dead and buried then perhaps this stock market celebration is a tad early. That is why you need to hear what 44 year investment veteran Steve Reitmeister is saying about what comes next for the stock market and how to stay on the right side of the action. Read on below for more...

Read More Stories

More Apple Inc. (AAPL) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All AAPL News