Apple Inc (NASDAQ: AAPL)’s stock has been a lemon this year. Shares are down more than 10% so far in 2022, and Apple is trading about 15% below the all-time high it hit in early January.
But with new iPhones set to be revealed Wednesday, will expectations for strong holiday sales – and all the subscription revenue that comes with that – be enough to turn Apple’s stock from red to green?
Apple Inc (NASDAQ: AAPL) has had some recent momentum. Shares are up more than 7% in the past three months. It’s also worth noting that Apple isn’t doing as poorly as the broader market and the rest of the FAANG stocks. Investors are finding comfort in Apple’s stable earnings growth and strong balance sheet, even in these tumultuous times.
The S&P 500, for example, has fallen nearly 18% this year while Facebook owner Meta Platforms Inc (NASDAQ: META), Amazon.com, Inc. (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX) and Google parent Alphabet Inc (NASDAQ: GOOGL) have been hit particularly hard. Amazon and Alphabet are each off nearly 25% in 2022 while Meta and Netflix have both plunged more than 50%.
Investors appear to be betting that the newest batch of iPhones will lead to solid jumps in profits for Apple.
Analysts are forecasting earnings per share increases of nearly 9% for this fiscal year and about 6% for 2023, respectable returns for a company as large as Apple. The tech giant is expected to generate $392.5 billion in sales this year and Apple is the world’s most valuable company, with a market capitalization of $2.5 trillion.
The company generates a huge amount of money from a new line of iPhones as existing customers upgrade and some holdouts make the switch from Android devices. Apple also rakes in big bucks from its lucrative services unit, subscriptions for iCloud, Apple Music, Apple TV+ and other perks for iPhone, iPad and Mac users.
“All the hoopla around the iPhone 14 upgrade cycle should help Apple in the short-term,” said Jordan Kahn, chief investment officer of ACM Funds. Kahn owns Apple in the ACM Dynamic Opportunity Fund.
One analyst thinks that more iPhone users than usual will look to get a new device following this launch. That’s because many customers seem to have been holding on to iPhones for longer periods of time before getting upgrades. (This reporter has stubbornly kept his ancient iPhone 8 Plus, partly out of fear of losing the home button). The release of new devices may prompt those users to finally upgrade.
Wedbush Securities analyst Daniel Ives noted in a report that Apple’s initial order for 90 million iPhone 14 units is roughly flat compared to what it had ordered for the iPhone 13, even with “macro storm clouds building.” So Apple clearly still expects its devices to sell even as consumer spending slows more broadly.
“This speaks to the underlying demand story that Apple anticipates for this next iPhone release with our estimates that 240 million of 1 billion iPhone users worldwide have not upgraded their phones in over 3.5 years,” Ives added.
Apple also benefits from the fact that it is a stock that is loved not just by individual investors but also by the giants of Wall Street.
According to research from market strategists at Goldman Sachs, Apple was a top pick of both mutual funds and hedge funds as of the end of the second quarter, along with other megacap tech companies including Amazon, NVIDIA Corporation (NASDAQ: NVDA) and Tesla Inc (NASDAQ: TSLA).
Apple is that rare beast, a stock that still is exciting enough for the growth crowd but is also attractive to value investors thanks to its reasonable price, penchant for stock buybacks to boost earnings and a steadily growing dividend.