Image courtesy of Shutterstock

Apple, Inc. (AAPL), the US’ most valuable company, designs and manufactures smartphones, personal computers, tablets, wearables, and accessories. It has a massive and growing global customer base for its iPhones. The company also sells software, services, accessories, networking solutions, and digital content and applications. It primarily operates via two segments – Products and Services.

AAPL is one of the best performing stocks in 2020, with the company generating record revenue and income growth. In its fiscal fourth quarter ended September 2020, AAPL posted revenue of $64.7 billion, led by record Mac sales and Services. International sales accounted for 59% of the company’s top-line. EPS for the quarter came in at $0.73, compared to the year-ago value of $0.76.

The work-from-home and home learning COVID-19 requirements this year have driven sales of AAPL’s smartphones, computers, and other core products. Consequently, the stock has gained nearly 70% year-to-date. This impressive performance and the expectation of more gains based on a several factors have helped it earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates AAPL:

Trade Grade: A

AAPL is currently trading higher than its 50-day and 200-day moving averages of $117.14 and $95.51, respectively, indicating that the stock is in an uptrend. Indeed, the stock’s 4.3% return over the past month reflects short-term bullishness.

AAPL recently unveiled its new line of Mac products. The company has introduced a new MacBook Air, a 13-inch MacBook Pro, and a Mac mini powered by the M1 Processors–the first generation of internally produced chips by the company. Though customers can still buy AAPL products with Intel (INTC)'s chip, the company’s shift to the new chip, the specs for which look solid, is happening rapidly

AAPL also unveiled four new iPhones in October, representing its first 5G iPhone lineup. The line includes the iPhone 12 and 12 Mini, the iPhone 12 Pro, and the 12 Pro Max. Offering customers a range of prices, the line should help generate significant revenue. The company has also unveiled its HomePod Mini. Finally, in September the company updated its Apple Watch, the iPad and iPad Air, and introduced Apple One, its new Services bundle.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, AAPL is fairly positioned. The stock is currently trading 10.3% below its 52-week high of $137.98.

Over the past three years, AAPL has grown more than 188%. AAPL’s top-line and EPS have increased at a CAGR of 6.2% and 12.5%, respectively, in the same period. iPhone sales are still at the core of revenue growth. In the last fiscal year ended September 2020, the product contributed half of the company’s top-line income. However, AAPL is now pivoting to a service-heavy model to reduce volatility in its business and boost margins.

Apple’s Service segment grew 16.2% year-over-year in its the last fiscal year as the company has moved toward a subscription-based model for its services, which includes consumer-facing lines such Arcade, iTunes, Cloud, Fitness, News+, and AppleTV. According to Morningstar, “Apple now has over 585 million paid subscribers to its various services, up 135 million from a year ago, and the firm expects 600 million subs by December 2020.”

Peer Grade: D

AAPL is currently rated #10 out of 30 stocks in the Technology – Hardware group. Other popular stocks in this group are Dell Technologies Inc. (DELL), HP Inc. (HPQ), and Logitech International (LOGI). While LOGI beat AAPL by gaining 87.4% year-to-date, DELL and HPQ returned 37% and 18.5%, respectively, over this period.

Industry Rank: B

AAPL is part of the StockNews.com Technology – Hardware industry, which is ranked #28 out of the 123 industries. The companies in this industry manufacture smartphones, PCs, cameras, monitors, and related accessories. The profitability of individual companies depends on technological innovation, anticipating customer requirements, and delivering consistent product quality.

Since the onset of the pandemic, the industry has witnessed an accelerated demand with people working and learning from home. Also, school closure, shelter-in-place guidelines, and rising unemployment have given people more time to spend on virtual entertainment platforms.

Overall POWR Rating: B (Buy)

Overall, AAPL is rated a “Buy” due to its impressive financial performance, robust demand for both products and services, the introduction of homegrown processors, and short- and long-term bullishness, as determined by the four components of our overall POWR Rating.

Bottom Line

It is true that AAPL’s price has been relatively flat as of late, even with the company coming off a solid earnings report. However, from September to November, AAPL introduced and updated several key products that should ensure solid sales during this holiday season.

Additionally, the latest iPhone 12, the first to offer 5G support, should serve as a major boost for the company’s upgrade cycle. AAPL’s fiscal first quarter ended December 2020 results will account for the holiday shopping.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for AAPL. The average broker rating of 1.46 indicates a favorable analyst sentiment. Of the 40 analysts that rated the stock, 22 have given it a “Strong Buy” rating. Analysts also expect revenue and EPS for the quarter to grow 15.3% and 11.2%, respectively, year-over-year.  We think this outlook should keep AAPL’s price momentum alive.

AAPL shares were trading at $123.26 per share on Tuesday morning, down $0.49 (-0.40%). Year-to-date, AAPL has gained 69.12%, versus a 16.34% rise in the benchmark S&P 500 index during the same period.

Want More Great Investing Ideas?

• 9 “MUST OWN” Growth Stocks for 2021
• Top 12 Stocks for 2021
• Chart of the Day- See Christian Tharp’s Stocks Ready to Breakout