Apple has had to grapple with supply chain challenges and rising interest rates.
Photo by DANIEL SLIM
Apple ’s better-than-expected earnings report helped shake off investor concerns about how a slowdown in consumer demand would impact the tech giant. As sentiment turns positive, it may be time to buy the stock, analysts say.
Investors were wary heading into Apple’s (ticker: AAPL
) earnings, heeding warnings about the cloud of macroeconomic challenges descending on the tech sector. Aside from slowing consumer demand, the company has had to grapple with nagging supply chain challenges and rising interest rates, which depressed estimates and price targets in the weeks before the report.
But Apple joined Amazon.com ( AMZN
) in assuaging investor fears on Thursday by posting solid quarterly results that beat expectations. Analysts reacted positively to the report, and gained confidence that the company could continue to outperform over the next few quarters.
“We would characterize this quarter as a major bullish statement on iPhone demand and Cupertino’s [the location of Apple’s main office] ability to navigate a supply chain shortage in an impressive performance,” wrote Wedbush analyst Daniel Ives on Friday.
Citi analyst Jim Suva agreed, saying he continued to see several positive drivers for Apple’s products and services in the months ahead, even though macro challenges will persist.
Suva outlined five reasons to buy the stock.
iPhone 14
Suva believes the iPhone 14 is still on track for a September launch, while a foldable phone could be in the works by 2024 at the latest. The iPhone 13 was the main driver behind Apple’s $83 billion in sales during its fiscal third quarter, boosting the bottom line even as Mac computer sales fell short of expectations.
Expansion of Services Segment
Apple has been working to build out its services segment, which Suva said would be able to deliver stickier recurring revenue, and open up the door for more devices-as-a-service offerings.
The company reached an all-time high in their installed base across iOS in the third quarter. This will be crucial as it means Apple has a “larger base to monetize over the long run,” wrote Evercore ISI analyst Amit Daryanani.
New Product Launches
In addition to an iPhone launch, the company is preparing to release artificial reality headsets and the Apple Car by 2025, both of which have yet to be factored into estimates, he added.
Demand Shift Toward Premium Products
The market continues to skew away from lower priced Android phones toward premium pricing products, Suva said, which will benefit Apple’s iPhone offerings.
Stock Buyback Program
The company’s $90 billion stock buyback program will keep boosting the shares in the long run, Suva added.
“We walk away from the conference call and June results incrementally more positive that Apple can navigate this economic storm with the demand and growth story well intact for the growth pillars of iPhones and Services front and center,” Ives wrote.
Write to Sabrina Escobar at [email protected]
