Apple Inc (NASDAQ:AAPL) is one of the largest tech firms in the United States. APPL stock has rebounded strongly over the last 12 months, now up 51%. The company boasts a market cap of over $2 Trillion and a steady 5 Year Beta of 1.20. In the most recent Q2 earnings, Apple turned over a record $89.60 Billion in revenue, a YOY improvement of 54%. Apple also paid a $0.22 cash dividend on May 13th, a 7% increase YOY which is a green light for long term shareholders. Investors are also excited about the new iMac and iPad Pro models alongside larger initiatives such as their clean energy program and a $430 Billion investment in US innovation and job creation. With an exciting outlook ahead, this article will breakdown the Apple stock forecast for 2021 and beyond.
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Are analysts bullish on Apple’s stock forecast?
Firstly, across the board of 34 Wallstreet analysts the general consensus is bullish. The average price target amongst analysts is currently $147.40 according to MarketBeat data. Following the Q2 earnings results of FY21, we saw a trend of upgrades from analysts suggesting a shift in “smart money” consensus. Here are a few of the recent targets:
- Barclays 5/19/2021 – Analyst Tim Long lowered the companies price target to $134 a share while maintaining a Equal Weight rating on the stock. The current target still implies an upside of 7%.
- JP Morgan 5/5/2021 – Analyst Samik Chatterjee reiterated the companies Buy rating with a 12 month price target of $165 a share (32.3% upside). Chatterjee noted that the relevance of higher-performance devices like Apple’s M1 Macs and iPads will drive growth in the work from home and remote learning environments.
- Wedbush 5/5/2021 – Analyst Daniel Ives boosted the firms 12 month price target at $185 (upside of 48%). This is currently the street high target on Wallstreet. The analyst noted the March earnings were “one for the record books” with Apple crushing analyst revenue expectations.
What this means for Apple investors?
It is clear the current consensus amongst analysts is bullish, with the average price target suggesting a neat upside from the current trading price of $125.89. Majority of analysts have boosted their price targets this month as a result of the record breaking Q2 earnings. This is a positive signal for investors which suggests analysts can see greater upside than in previous valuations. Interestingly, one of the lowest price targets amongst large institutions is from the Goldman Sachs Group with a PT at $130 a share. This target, although conservative is still above the current trading price.
What are the revenue forecasts for 2021?
Firstly, revenue forecasts from analysts can provide investors a greater insight into the midterm outlook of the company. Analysts expect revenue to plateau in the next two quarters with average estimates at $72.87 Billion (Q3) and $81.05 Billion (Q4) respectively. Looking ahead the remainder of the year, analysts expect the company to generate $354 Billion in 2021. This forecasts would represent a 29% YOY growth in revenue which is an impressive achievement for such a large scale corporation. Analysts expect revenue to be similar in 2022, with average forecasts estimating Apple to generate $368.99 Billion.
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The main revenue drivers for this growth
When looking deeper into the revenue drivers of the business, it is worth noting Apple’s Q2 revenue was heavily influenced by international sales. According to Apple, 67% of sales were generated overseas in the second quarter. Apple also saw “double digit” growth within each product category suggesting their products are continuing to gain momentum with customers across the globe. The companies strongest product category is the iPhone, which drove $47.93 Million in sales in Q2 (YOY growth of 67%).
“We are proud of our March quarter performance, which included revenue records in each of our geographic segments and strong double-digit growth in each of our product categories, driving our installed base of active devices to an all-time high. These results allowed us to generate operating cash flow of $24 billion and return nearly $23 billion to shareholders during the quarter.”said Luca Maestri, Apple’s CFO.
What are the risks facing Apple stock?
The global shortage of semi-conductors and COVID-19 restraints has placed additional pressure of large scale tech firms such as Apple. Last month, Apple reportedly slowed down production of the MacBook and iPad due to chip shortages. In addition, Tim Cook estimates Apple to lose $3-4 Billion in the next quarter as a result of the shortage. The semi-conductor shortage seems to be a industry wide issue and will likely continue to impact business through 2021/22.
In addition, some analysts such as Tim Long at Barclays see Apple potentially changing their Appstore commissions due to unfolding events such as the Epic Games vs. Apple lawsuit. Jennifer Rie, a senior litigation analyst for Bloomberg Intelligence noted that the lawsuit could influence the way Apple controls IOS and could see Apple take a hit in revenue as a result. However, Apple argue that the actions of Epic Games bypassing in game purchases was a breach of contract and therefore had grounds to remove the game from the Appstore.
In summary, the analyst price targets illustrate a bullish sentiment with the average target showing upside from the current trading price. In addition, the product sales growth during a period of shortages and COVID-19 uncertainty is positive news for investors. However, it is important to note the risks facing Apple stock. Primarily the evolving chip shortage which will restrict supply of Apple products alongside an unfolding lawsuit with Epic Games. Further supply constraints may place additional pressure on Apple’s share price in the near future.
Written by Tyger Fitzpatrick
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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