The market has sold off, and some high-quality names — like the world’s most valuable company, Apple — look ripe for buying.
Jacob Sonenshine for Barron’s:
Apple stock is down about 12% from its high for the year, and now trades at about 26 times analyst’s estimates for earnings per share over the next 12 months, down from a 2023 peak of about 30 times. Even though that’s above the S&P 500’s 18 times, earnings growth over the next few years—and predictability of it—should keep the stock moving higher.
Analysts forecast annual sales growth of nearly 8% over the next three years to about $488 billion by 2026, according to FactSet. Millions of iPhone users could upgrade over the next couple of years, and demand looks strong for new phones so far. Billions of iPhone users could be incentivized into using more Apple services such as streaming and payments.
Services carry higher profit margins than hardware, so the company’s total operating margin should increase over the next few years, which means profit dollars could grow faster than 8%. Add in continued share buybacks and earnings per share should grow by a double-digit percentage annually.
MacDailyNews Take: As always, accumulate.
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[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]