We may sound like a broken record but even Club holding Apple (AAPL) is not immune to supply-chain disruptions, increasing macroeconomic concerns, consumer demand shifts to traveling and the strong U.S. dollar. Apple is a $2.5 trillion company that reaches consumers globally, which means it will inevitably be impacted by what appears to be a looming recession, like the rest of the tech sector has. Despite this the Investing Club remains cautiously optimistic heading into Apple’s fiscal third-quarter earnings, which will be released after the closing bell Thursday. Here’s what to keep top of mind ahead of Apple’s results. Own Apple, don’t trade it On April 11, ahead of Apple’s fiscal second-quarter earnings, we sold 350 shares of AAPL to right-size our position because it was too big at that time and downgraded the stock to a 2 rating. Then, Apple reported its second – quarter earnings , released on April 28, delivering strong results including record revenue, a 5% dividend increase and $90 billion buyback authorization, returning $27 billion to shareholders through dividends during the quarter. Apple yet again showed it has a strong balance sheet with a $73 billion net cash position that can help the company continue to invest in its growth. Apple’s Q2 showed that the company’s robust cash flow, strong cash position and balance sheet can help it ride out market volatility. On May 13 , we upgraded the stock back to a 1 rating, meaning, we think it’s a buy at current levels. AAPL is the club’s third largest stock weighting in the portfolio. We are bullish on Apple and plan to stick with the stock long-term: Own it, don’t trade it is our mantra. Look back, look ahead Coming out of Apple’s previous quarterly report, the market was surprised by the company’s warning that supply issues may lower sales between $4 billion to $8 billion. This could help manage expectations into the release. Apple has been facing supply chain issues that are expected to have an impact on the upcoming production. Wall Street is aware of the challenges Apple faces in the just-complete Q3 including the impacts stemming from China’s Covid lockdowns as well as foreign exchange issues. Despite this revenue risk, we believe the market has prepared for this headwind. As supply issues improve, global demand is expected to rise along with it. Apple’s competitive advantage is its strong brand loyalty with consumers waiting for upgrades on its ecosystem of products, which can continue to drive sales as supply issues gradually get better. We will be looking out for updates on supply chains, how iPhone demand is holding up in this challenging economic climate, and management commentary on the path ahead. Strong product lineup Apple is one of the world’s most valuable technology platforms that aims to provide its customers with the best user experience through its proprietary line-up of products including the iPhone, iPad and Macs as well as its services like Apple Pay, iCloud and Apple Music. At its recent Worldwide Developers Conference in early June, Apple launched new models of its MacBook Air and MacBook Pro, designed with its new M2 processor chip. Apple already has an efficient M1 chip but M2 has more power efficiency and maximizes performance. Basically, the second generation M2 chip takes the M1 chip to another level of performance, which can be a real bellwether for Apple. Amid weakening consumer demand, we will be paying attention to the company’s MacBook sales and any forecast on iPhone products, which are key to the company’s growth prospects. Apple’s service business which includes Apple TV, the App Store, Apple Music, iCloud and others is central to the company’s growth. Last quarter this segment came in slightly lower than estimates despite rising 17% year over year. And come on, Services generated to $19.82 billion in revenue in Q2. This quarter, we will be looking to see if Apple’s services segment can meet expectations. Streaming ambitions Apple is an industry-leading innovator that is vying to be a leader in the video streaming market. In June, Apple announced a 10-year deal with Major League Soccer starting in 2023. This deal, coupled with its Major League Baseball deal will add to Apple’s growing streaming platform. We think Apple can surpass all other streaming services in the long run to become a dominant streaming platform. Last week, a Morgan Stanley analyst said that Apple could add another $1 trillion to its market cap if it leans into a subscription-based model. (Jim Cramer’s Charitable Trust is long AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
