Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Apple’s Market Cap and Earnings Weight Will Have Investors' Attention

By Brian GilmartinStock MarketsApr 24, 2016 12:19AM ET
Apple’s Market Cap and Earnings Weight Will Have Investors' Attention
By Brian Gilmartin   |  Apr 24, 2016 12:19AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Last week, we noted the continued increase in the “forward 4-quarter estimate” which was unusual given the typical pattern, and in fact Thomson re-checked the data and found the estimate was not accurate, but the error wasn’t material. Last week’s $126.08 forward estimate (initially) was revised to $124.83, or what was about a 1% overstatement of the forward estimate.

Here is this week’s new data per Thomson Reuters and “by the numbers”:

  • Forward 4-quarter estimate: $124.78 versus last week’s corrected $124.83 was less of a revision lower this week than is typical
  • P.E ratio: 16.76(x)
  • PEG ratio: 9.25(x), and still very distorted
  • S&P 500 earnings yield: 5.97%
  • Year-over-year growth rate of the forward estimate: +1.81% versus last week’s revised 1.09%. This is the 3rd week in a row the “growth rate’ of the forward estimate has now risen, and the the 15th of the last 16 weeks that it has increased, BUT we need to see the growth rate start to improve at a faster rate.

Q1 ’16 earnings – how do they look?

So far, with 132 companies having reported Q1 ’16 financial results, 77% of the 132 companies have beat the consensus estimate, while 58% of the companies have beaten the consensus revenue estimate. Thomson notes that Q1 ’16 earnings are +4.4% above consensus, and Thomson also notes that “it is likely that Q1 2016’s earnings growth rate will substantially improve by the end of this earnings season."

Trinity’s expectation for Q1 ’16 earnings “ex-Energy” was low-single-digits year-over-year earnings growth, and that certainly looks achievable today.

Ex-Energy, per both Thomson and Factset, S&P 500 earnings growth for Q1 ’16 is -3.5% versus the -8.9% expected originally (including Energy sector).

Apple (NASDAQ:AAPL) earnings – did iPhone shipments bottom in fiscal Q1 ’16?

The big report that will get beaten to death on the fat box this week is Apple’s fiscal Q2 ’16 earnings release, which was pushed back a day to Tuesday, April 26th, 2016 after the closing bell, due to the death of Bill Campbell.

Apple is 3.2% of the S&P 500 by market cap, but closer to 5% – 6% of the S&P 500 by earnings weight. That is a big chunk of the S&P 500.

Looking at the estimates and how they have progressed over the last 90 days, Apple’s revenue estimates for fiscal ’16 have come down sharply, and the expected 2016 revenue growth rate for Apple has come down from +5% to -3% coming into Tuesday’s release. After the January ’16 report, it was read from one analyst that he thought iPhone shipments had bottomed with the Q1 ’16 financial release. The revenue revisions might indicate otherwise.

Last April ’15, or almost exactly one year ago, this blog article was posted prior to Apple's April ’15 earnings release. Technically, looking at the chart, Apple put in a pretty clear “top” in the mid $130s in 2015.

Is Apple’s decade-long run over? Could Apple now be just another busted growth stock? I thought I heard or read this past week that Apple was the worst performing Dow 30 stock year-to-date, but Apple closed 2015 right at $105 per share and that is where the stock closed Friday, April 22nd, 2016, and the S&P 500 is flat to +1% on the year, so holding Apple year-to-date hasn’t hurt investors much from a relative performance perspective too much. iPhone shipments met unit estimates for Q1 ’16, but the iPad numbers continue to languish.

Apple valuation:

Current consensus estimates per Thomson indicate that – over the next 3 fiscal years, fiscal ’16 through ’18 – Apple is expected to grow EPS 6%, and revenue 3%.

Trading at 3(x) cash-flow (ex cash) and 4(x) free-cash-flow (ex cash) and roughly 11(x) forward earnings, Apple is dirt cheap on a valuation basis, but so were so many of the busted “tech” growth stocks from the 1990s that had no answer when Schumpeter’s creative destruction came calling.

While a client’s current Apple position is roughly 1.9% today versus last April ’15’s 4%, barring anything unusual on Tuesday night, the company deserves the benefit of the doubt here.

The US tax code, and Apple’s $215 bl in cash held overseas as of 12/31/15, and the strength of the US dollar are distorting so much of the S&P 500.

Apple is still a “retail investor” darling, but Apple may be just another consumer staple: great brand, great product, great dividend, with low single-digit growth.

A $585 billion market cap makes for a tough needle to move.

Summary / conclusion: By the end of this coming week, about half the S&P 500 will have reported Q1 ’16 results. We also hear from Exxon (NYSE:XOM) and Chevron (NYSE:CVX) on Friday, April 29th, which could be more critical than Apple. Long Apple and XOM. Q1 ’16 earnings are coming in better than expected, which isnt unusual, however we get to hear from a lot more energy companies over the next two weeks. I will be watching the full-year 2016 expected Energy sector earnings growth. The y/y growth rate of the S&P 500 forward estimate needs to start to push higher for the S&P 500 to push to all-time highs.

The headwinds that have been squashing the market the last two years (like sitting on a beach ball in a pool), i.e. Energy and Basic Materials earnings, plus the strong dollar, look to be ebbing.

Apple’s Market Cap and Earnings Weight Will Have Investors' Attention

Wondering Whether Apple is a Buy Right Now?

Based on Apple's latest earnings report and current market price we identify 4 key data points regarding Apple's stock:

Unlock AAPL Insights
View all of Apple's key data with InvestingPro+

Related Articles

Tim Knight
Major Indices Closing The Gap By Tim Knight - Jun 24, 2022 3

Below are major indexes which have either closed their gaps are are extremely close to doing so. Dow Jones Composite: Dow Jones Industrials: S&P 500:

Declan Fallon
Inching Higher By Declan Fallon - Jun 24, 2022 1

Despite putting in the groundwork for a swing low we are still not seeing a whole lot of demand for building a rally off the lows. There should be more upside in the tank, but once...

Apple’s Market Cap and Earnings Weight Will Have Investors' Attention

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email