Apple (NASDAQ:AAPL) is gearing up to reveal its fiscal Q2 results after markets close on Thursday, and investment firm Baird expects them to be solid. However, analyst William Power, who has a Buy rating on Apple, points out that the company’s current valuation could be an issue. He praises Apple’s long-term ecosystem benefits, profitability, and shareholder returns but suggests keeping an eye out for better buying opportunities during market pullbacks.
At the moment, Apple shares are trading at a significant premium compared to the S&P 500, with valuations at 27.8 times 2023 estimated earnings and 26.3 times 2024 estimated earnings. Meanwhile, the S&P 500 trades at roughly 19 times estimated earnings.
For Q2, Power predicts earnings of $1.41 per share and revenue of $92.1 billion, with iPhones contributing $47.9 billion. He expects a 2.1% year-over-year increase in Services revenue to $20.2 billion, but Mac sales might face challenges due to a 40% year-over-year drop in shipments.
Overall, AAPL stock has a Strong Buy consensus rating based on 21 Buys, three Holds, and one Sell assigned in the past three months. However, the average price target of $177.23 per share leaves little upside potential at just over 4%.