A Golden Investment Opportunity: 1 Top Stock to Buy Before It Soars 40% to Hit $4 Trillion, According to a Wall Street ... - Yahoo Finance | Canada News Media
Apple(NASDAQ: AAPL) remains a top technology stock at Wedbush Securities despite worrisome results in its China business. Analyst Dan Ives dismissed those concerns as noise and recently said Apple will become the first $4 trillion company by the end of 2024. That prediction implies 40% upside from its current market capitalization of $2.85 trillion.
Ives provided additional commentary in a note to clients: “With roughly 240 million iPhones in the window of an upgrade opportunity globally now at play for iPhone 15, and services reaccelerating into [fiscal year 2024], we view this as a golden opportunity to own Apple for the next year.”
Here’s what investors should know.
Apple worried investors with declining sales in China and a weak outlook
Apple reported better-than-expected financial results for the first quarter of fiscal 2024, which ended Dec. 30, 2023. Revenue rose 2% to $119.5 billion on a modest uptick in iPhone sales and more robust growth in services revenue. Management highlighted advertising, video, and cloud services as major contributors to that momentum.
Apple earns higher margins on services than hardware, so the company has become more profitable over time as its services business has scaled. That trend continued in the first quarter. Gross margin expanded 290 basis points and GAAP earnings jumped 16% to $2.18 per diluted share. Stock buybacks also contributed to rapid bottom-line growth.
The chart below provides a more detailed look at Apple’s revenue growth in the first quarter.
Chart by Author. Shown above is Apple’s revenue across all five business segments in the first quarter of fiscal 2024 (ended Dec. 30, 2023).
Despite strong results, Apple shares slid about 4% following the report for two reasons. First, sales declined 13% in China, fueling concern that the company is losing share to domestic competitors like Huawei and Xiaomi. Jeffries analysts estimate that iPhone sales fell 30% in China during the first week of 2024. That is a pressing concern because China is Apple’s third-largest market and represents one-sixth of total revenue.
Second, while Apple did not provide formal guidance, management implied that revenue would fall about 5% in the second quarter. CFO Luca Maestri attributed that weak outlook to the absence of certain tailwinds. Specifically, Apple benefited from pent-up iPhone demand in the second quarter of last year because factory closures had previously limited production.
Apple is a consumer electronics leader with growth opportunities in services
Apple has a strong presence in several corners of the consumer electronics market. Its leadership in smartphones (as measured by revenue and shipments) is the foundation of its business. But the tech titan also enjoys a dominant position in the tablet and smartwatch markets, and it’s one of the largest personal computer vendors. That success is built on brand authority and engineering expertise.
Specifically, Apple pairs premium hardware (including custom chips) with proprietary software and services to create a compelling user experience. And while the iPhone is the center of that ecosystem, adjacent products like Macs and AirPods make the ecosystem stickier. Those qualities grant Apple substantial pricing power. The average iPhone costs twice as much as the average Android smartphone, according to Insider Intelligence.
That pricing power allows Apple to invest heavily in research and development. The company recently launched its first mixed-reality device, the Apple Vision Pro, a product some pundits believe will eventually replace the iPad.
Apple’s installed base surpassed 2.2 billion devices in the first quarter. The company monetizes those consumers once with the initial purchase, but it aims to monetize them continuously thereafter with its services business. For instance, Apple earns services revenue on App Store fees and related advertising, iCloud storage, and financial products like Apple Pay, among other subscription products.
The company has a strong position in a few of those categories. The Apple App Store leads the mobile application market in revenue; Apple is the fifth-fastest-growing digital advertising company in the U.S.; and Apple Pay is the most popular in-store mobile wallet among U.S. consumers.
Apple shares trade at an expensive valuation compared to big tech peers
To create shareholder value, Apple needs to maintain its strong position in smartphones and continue to grow its services business. The company must also stay current on nascent technologies like virtual reality and augmented reality. Products that incorporate those technologies could be the next big thing in consumer electronics. If Apple falls behind, it may be displaced in the same way the iPhone displaced products from Nokia and BlackBerry.
Whether Apple reaches $4 trillion in 2024 is a coin toss. Investors interested in buying the stock should plan on holding it for three to five years at a minimum. Personally, I doubt Apple can deliver market-beating returns during that period. Its current valuation of 29 times earnings looks expensive compared to the long-term earnings growth of 9.4% annually that Wall Street expects.
Taken together, those values produce a PEG ratio of 3.1 for Apple. For context, Alphabet has a PEG ratio of 1.5, Amazon sports a PEG ratio of 2.3, and Microsoft has a PEG ratio of 2.5. That means Apple is more expensive than its big tech peers.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
