Apple Inc. (AAPL) is among the five big tech companies whose shares have helped fuel the gain in the S&P 500 Index (SPX) so far this year. However, Apple also is likely to stand out for delivering unimpressive increases in sales and earnings per share (EPS) for 2017 and 2018, according to Goldman Sachs Group Inc. (GS). This raises the question of how long Apple's shares can continue to outperform the market. By contrast, Facebook Inc. (FB), Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX) are among the leading S&P 500 companies regarding projected 2017 and 2018 growth in both sales and EPS, outpacing Apple on both metrics, according to Goldman in its latest U.S. Quarterly Chartbook.
Apple Trails FAANG Rivals
As a whole, the S&P 500 is projected to deliver 7% sales growth in 2017 and 5% in 2018, per Goldman. The respective figures for Apple are 7% and 9%. That's pretty good if you're an average company - and not so good for a superstar stock like Apple. The other three tech giants, meanwhile, are in the top seven S&P 500 companies for 2017 and the top four for 2018. Their respective estimated sales growth rates for 2017 and 2018 are: Facebook, 39% and 28%, Amazon.com, 22% and 21%, and Netflix, 28% and 20%.
EPS growth for the S&P 500 is forecast to be 11% in both 2017 and 2018, Goldman indicates. Apple is projected to post mixed results, increasing EPS by 10% in 2017 and 15% in 2018. The other three companies are expected to be in the top six of the S&P 500 for 2017 and the top eleven for 2018. Their respective estimated EPS growth rates for 2017 and 2018 are: Facebook, 41% and 23%, Amazon.com, 46% and 68%, and Netflix, 155% and 82%.
Rounding out the five FAANG stocks, Google parent Alphabet Inc. (GOOGL) has projected sales growth of 19% in 2017 and 16% in 2018, and estimated EPS growth of 1% and 18%, per Goldman. So - Apple's 10% EPS growth this year may be below the S&P average, but it looks pretty good at least compared to Google's 1 percent increase as forecast by Goldman. Note that Goldman excludes financial, utility and real estate companies from its analysis of expected sales growth. Additionally, Goldman rates all five FAANG stocks as buys.
Key Profit Drivers
Facebook is expanding both its user base and its advertising revenue. Amazon.com is extending its reach into more retailing categories, while eliminating the competition virtually everywhere it goes. And Netflix's entertainment offerings are becoming an increasing ubiquitous part of everyday life. (For more, see also: Why Tech Stocks Will Surge Again. and More Than Half of Americans Have Access to Netflix.)
Apple has been losing ground to Samsung Electronics Co. Ltd. (SSNLF), which has sold more smartphones worldwide in every year since 2011. Additionally, the South Korean tech giant is about to surpass Apple as the most profitable tech firm globally. Adding insult to injury, Apple is dependent on Samsung as a key supplier. (For more, see also: The World's Most Profitable Big Tech Isn't Apple.) To be sure, if Apple pulls off a successful rollout of the iPhone 8 this year and a surge of sales along with it, the company's prospects will look much better.
Other Tech Leaders
Salesforce.com Inc. (CRM), a leading supplier of customer relationship management software, is projected to increase EPS by 34% in 2017 and 30% in 2018, per Goldman. For chipmaker NVIDIA Corp. (NVDA) the projections are 34% and 18%, respectively. For graphical software developer Adobe Systems Inc. (ADBE) estimated EPS growth in 2017 and 2018 is 37% and 24%, respectively.
Near the bottom of Goldman's list for EPS growth in both 2017 and 2018 are: computer networking leader Cisco Systems Inc. (CSCO), at 1% and 3%, respectively, computer maker International Business Machines Corp. (IBM), at 0% and 2%, and chipmaker Qualcomm Inc. (QCOM), projected to post a 12% EPS decline in 2017 and no increase in 2018.
Apple may look pretty good compared to these laggards, but owners of Apple's richly priced stock expect a leader.