All eyes are on technology giant Apple AAPL, which is set to release fourth-quarter fiscal 2024 results after market close on Oct. 31. Since Apple accounts for nearly 7% of the total market capitalization of the entire technology sector on the S&P 500 Index, it is worth taking a look at its fundamentals ahead of its quarterly results.
Apple has gained about 7% over the past three months, underperforming the industry’s growth of 7.3%. The trend might reverse if the tech giant comes with an earnings beat (see: all the Technology ETFs here).
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ETFs having the largest allocation to the tech titan are in focus now. Vanguard Information Technology ETF VGT, MSCI Information Technology Index ETF FTEC, iShares US Technology ETF IYW and Technology Select Sector SPDR Fund XLK have Apple as the top firm with a double-digit allocation. These ETFs have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
Apple has an Earnings ESP of -10.37% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Apple saw a negative earnings estimate revision of 5 cents over the past seven days for the fiscal fourth quarter. The iPhone maker has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 3.79% in the trailing four quarters. The Zacks Consensus Estimate indicates a modest year-over-year increase of 2% for earnings and 5.5% for revenues (read: Should You Buy Apple ETFs as the Stock Hovers Around a Record High?).
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote
The tech giant currently has a Wall Street analyst recommendation of 1.86 on a scale of 1 to 5 (Strong Buy to Strong Sell), made by 32 brokerage firms. This is up from 1.76 a month ago based on 31 recommendations. Of the 32 recommendations, 18 are Strong Buy and 4 are Buy. Based on short-term price targets offered by 34 analysts, the average price target for Apple comes to $241.67. The forecasts range from a low of $184.00 to a high of $300.00.
Apple has a solid Growth Score of B but it belongs to a bottom-ranked Zacks Industry (bottom 18%). At current levels, Apple’s stock looks expensive, trading at 31.16X forward earnings, a premium to the Zacks Computer-Micro Computers industry average of 14.98X.
The iPhone manufacturer returned to revenue growth in the third quarter of fiscal 2024 and introduced four versions of the iPhone 16 based on AI last month. The new AI-based iPhones will likely kickstart the next big upgrade cycle, enhancing the company’s performance and restoring investor confidence in Apple. iPhone 16 sales in China were up 20% in the first three weeks of the launch compared with the iPhone 15 series, Bloomberg reported (read: What Lies Ahead of Apple Stock & ETFs: Up or Down?).
The stock is hovering around a new high on improving demand for its latest iPhone 16. The preliminary data from International Data Corporation showed that Apple enjoyed 3.5% year-over-year growth in shipments in the calendar year’s third quarter, fueled by strong demand from the previous models and the launch of the new iPhone 16 lineup. Additionally, Apple has managed to recapture some of its market power in China. The iPhone maker had the second-highest share of the Chinese smartphone market at 15.6% in the third quarter, re-entering the top five after falling to sixth place in the second quarter.
For the fiscal fourth quarter, the iPhone maker expects overall revenues to grow at a rate similar to the 5% growth in the third quarter.
The tech giant finally launched Apple Intelligence — its suite of AI tools — on select devices this week with its latest software update for iPhones, iPads and Macs. Apple’s AI features for iPhones will be available for free to users with any iPhone 16, iPhone 15 Pro and Pro Max, who update to iOS 18.1. Apple Intelligence is also available for iPad and Mac models that support iPadOS 18.1 and macOS Sequoia 15.
Vanguard Information Technology ETF (VGT) – Apple accounts for a 16.1% share.
MSCI Information Technology Index ETF (FTEC) – Apple accounts for a 15.8% share in the basket.
iShares US Technology ETF (IYW) – Apple makes up 15.5% of the assets.
Technology Select Sector SPDR Fund (XLK) – Apple accounts for a 14.6% share in the basket.
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Apple Inc. (AAPL) : Free Stock Analysis Report