- Apple stock has traded lower following Q3 2015 earnings, driven by concerns surrounding iPhone sales.
- iPhone 6S is reportedly off to a strong start, and should address the iPhone concerns among investors.
- Strong fundamentals, attractive valuations and iPhone 6S performance will drive Apple stock higher over the coming months.
2014 was a year of records for Cupertino as the Apple (NASDAQ:AAPL) iPhone 6 took the world by storm, selling over 10 million units on the opening weekend. The iPhone 6 units continued selling like hot cakes, delivering a record Q1 2015 earnings report, driven by the success of the iPhone 6. The tremendous success of the iPhone 6 lead to a record 182 million iPhone unit sales in the three quarters following the launch.
iPhone 6S sales on course to beat iPhone 6 Records
Fast forward by one year, and its time for the successor. Initial reports suggest the latest addition to the iPhone family -- iphone 6S -- is well on course to break the records set by the iPhone 6. However, a point worth noting is the fact that China counts among the launch markets for the iPhone 6S, skewing the numbers to that extent. A strong start to the iPhone 6S could quell investor concerns surrounding the tough comps set by the iPhone 6, and the consequences on Apple stock could be telling.
Apple Stock Fell on iPhone Concerns
Apple stock price has moved lower by 8.4% over the last 6 months, driven in part by the broader market fall and concerns surrounding the slower than expected iPhone sales revealed in the Q3 2015 Apple earnings report.
The iPhone is a critical cog in the Apple wheel, making up close to 65% of the company's LTM revenue. The strong performance of the iPhone 6S could drive the stock higher, making up for the fall driven by iPhone sales concerns.
Apple Valuations at 2 year low
The stock hasn't traded exactly in-line with the fundamentals over the last one year. LTM revenue is up 26% YoY (Q3 2015 vs Q3 2014). The earnings growth has been even better at 40% YoY. With over $202 billion (as of Sep 2015 end) sitting on the balance sheet and a debt to equity ratio of 0.43, there remains little reason for investors to be spooked by the finances of Cupertino. The stock, though up 14% over the last one year, has trailed the revenue as well as earnings growth by a huge margin. The result; Apple stock is now trading at the lowest valuations over the last two years.
Source: Apple PE data by amigobulls.com
Apple stock price has been depressed over the last few months by concerns surrounding iPhone sales. With the iPhone 6S off to a strong start and strong growth in underlying fundamentals, Apple stock remains an attractive investment option at its currently depressed valuation multiples.