Apple (AAPL) is a leading global consumer technology company that generates 40% of its revenue from the Americas and the remainder from around the world. The company is most famous for its wildly popular smart phone product series known as the iPhone, but it also sells computers, smart watches, tablets, and televisions along with a wide array of services.

AAPL’s main value comes from its incredibly strong brand name and sleek product designs. Its enduring popularity enables it to charge premium prices for its products and generate outsized profit margins while also enjoying a broad and very sticky customer network.

Thus far, the results have been terrific as the stock has generated total returns that exceed the S&P 500’s by over 18-to-1 since its IPO. Additionally, the company commands the vast majority of the world’s mobile phone profits. (See Apple stock analysis on TipRanks)

Potential Headwinds

Despite its remarkable success and fat profit margins, AAPL does still face a few challenges. First, its products are quite expensive, pricing many would-be customers out of its products and pushing them towards cheaper-priced competitors. Secondly, as emerging markets mature and AAPL’s products reach saturation level, growth will become more challenging. Thirdly, as technology continues to advance, AAPL may find it increasingly difficult to differentiate its products from competitors', leading to declining margins and/or stagnating volumes.

Valuation Metrics

Despite these risks, AAPL still possesses considerable competitive advantages due to its world-renowned brand, immense financial resources, and army of top tier engineer and artist employees. They will likely continue to fuel innovation and enable Apple to continue capturing the fascination of consumers.

Additionally, the Price to Forward Normalized Earnings looks pretty reasonable at 24.31x compared to the S&P 500’s forward Price to Earnings ratio of 21x. It actually looks cheap when you consider that U.S. long-term interest rates remain extremely low at just 1.63%.

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Last, but not least, AAPL is one of the strongest companies in the world and – aided by aggressive share buybacks and heavy investment in innovation – its earnings-per-share growth rate is likely to come in at ~10% on average for the foreseeable future.

Wall Street’s Take

From Wall Street analysts, AAPL earns a Moderate Buy analyst consensus based on 18 Buy ratings, 5 Hold ratings, and 2 Sell ratings in the past 3 months. Additionally, the average AAPL price target of $157.58 puts the upside potential at 25.17%.

Summary and Conclusions

AAPL faces a murky long-term organic growth outlook as its core iPhone business will likely hit a saturation point in growth markets soon. Furthermore, technological innovation may eventually render the iPhone indistinguishable and/or obsolete relative to competitor’s products.

That said, the company has numerous exceptional competitive advantages that should enable it to innovate at, or ahead of, the competition. It has a massive cash pile that it can (and is) using to drive growth via strategic acquisitions and share buybacks, and Apple also has an army of highly talented creatives and engineers. Furthermore, AAPL still enjoys solid short-term growth prospects.

Last but not least, the stock’s price looks potentially attractive, especially given the low overall risk of the company and Wall Street’s overall bullish take on it at current prices.

Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.