Key Takeaways:
- The 2-Minute Valuation Model values Apple stock at $250/share in about 2.5 years.
- That’s a potential 32% upside from today’s price of around $189/share.
- Apple is expected to see double-digit annual earnings growth going forward, which can fuel double-digit annual returns for the stock.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Apple Inc. (AAPL) continues to be a cornerstone of the tech industry, known for its innovative products and strong market presence.
Today, it looks like the stock could offer double-digit annual returns over the next few years, as the company is expected to continue seeing sales growth.
Find the best stocks to buy today with TIKR! >>>
What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why Apple Looks Undervalued
Forecast
Apple is projected to increase normalized earnings per share by a little over 10% annually over the next 3.5 years.
Analysts estimate that Apple’s EPS will reach $11.47 in 2028, so in our valuation, we’ll be really conservative and estimate that the stock will reach $10 in earnings-per-share in 2028.
This earnings growth is likely to be driven by:
- Product Innovation and Diversification: Continued leadership in innovation with new product lines and enhancements in existing categories (iPhone, iPad, Mac, Wearables).
- Services Expansion: Robust growth in Apple’s services segment, including App Store, Apple Music, and cloud services, contributing to higher profit margins.
- Market Expansion: Increasing presence in emerging markets with middle-class growth, particularly in Asia and Africa.
View Apple’s full analyst estimates >>>
Valuation Multiple
Apple has traded at an average forward P/E multiple of about 28x over the past 5 years, as shown in the historical P/E chart.
Today, the stock is trading right around its 5-year average at about 27.2 times forward earnings:
This makes it look like the stock is just about fairly valued today.
We’ll use a conservative forward P/E multiple of 25 in our valuation, which is a touch below where the stock has traded over the past 5 years.
Fair Value
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2028 EPS estimate: $10.00
- Conservative forward P/E multiple: 25x
Expected Normalized EPS ($10.00) * Forward P/E ratio (25x) = Expected Share Price ($250)
The 2.5-year expected share price we would get from this valuation is $250/share.
This presents a substantial potential upside for the stock since the stock today trades at around $189/share.
The stock could have a 32% potential upside over the next 2.5 years, which means the stock could see a nearly 12% annualized return:
Keep in mind, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
Value stocks quicker with TIKR >>>
Analysts’ Price Target
Today, analysts have an average price target of about $250/share for Apple stock today, which means they see just over 20% upside for the stock today.
This just so happens to be the exact same as the 2-Minute Valuation Model’s target price of $250/share. It’s clear that analysts think the stock is undervalued today:
Analyze stocks quicker with TIKR >>>
Risks to Consider
While our valuation suggests the stock is well undervalued, investors should be aware of several risks:
- Competitive Intensity: Intensified competition in all major product categories, particularly from other tech giants.
- Regulatory Challenges: Potential regulatory actions, especially in the U.S. and EU, that could impact business operations.
- Global Economic Fluctuations: Vulnerability to economic downturns which may affect consumer spending patterns.
TIKR Takeaway
Apple’s ability to innovate and capture premium market segments suggests that the stock could be undervalued.
Apple stock could deliver 12% annualized returns over the next 2.5 years due to the company’s double-digit annual projected earnings growth.
Is Apple a buy over the next 24 months? Use TIKR to check the stock’s 5-year growth forecasts and other financial metrics to see if the tech stock looks undervalued today.
Looking for New Opportunities?
- See what stocks billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
