rtmark
LearnBonds.com

Should You Buy Apple Stock after the Recent Fall?

apple stock

All of the FAANG companies have reported their earnings. Barring Meta Platforms that spiked following the earnings release, the remaining four constituents fell after they reported their earnings for the March quarter. Apple also fell after reporting its fiscal second-quarter 2022 earnings even as the fall was quite tepid as compared to Netflix, Amazon, and Alphabet.

Apple stock is down 11.2% so far in 2022. While it is still a YTD loss, investors can take some succor from the fact that it is the best performing FAANG stock of the year and is also outperforming the Nasdaq so far. Apple was the second-best performing FAANG stock of 2021 after it gained pace in the back half of the year. Before that, it was the best performing FAANG stock for two years. What’s the forecast for AAPL stock after the fiscal second quarter 2022 earnings and is it a buy after the recent correction?

Apple reported better than expected earnings

Apple reported revenues of $97.28 billion in the fiscal second quarter of 2022 which ended on March 26. The company’s revenues increased 8.6% YoY and were higher than the $93.89 billion that analysts were expecting. As has been the case for the last many quarters, the services revenues grew much faster than the product revenues. In the March quarter, Apple’s services revenues increased 17% to $19.8 billion. It was another record quarter for the services business.

iPhone revenues were better than expected

Looking at the other verticals, iPhone revenues increased 5.5% to $50.57 billion and were higher than what analysts were expecting. Mac revenues increased 14.7% while other product revenues increased 12.4% in the quarter. However, as was the case in the previous quarter, iPad sales were weak and fell 1.92% in the quarter.

Apple delivered a record quarterly revenue in the March quarter and its sales in North America, Greater China, and Europe were a record for the period. Notably, the company faced headwinds in Europe in the quarter as it stopped selling in Russia. Also, the spillover effects of the Russia-Ukraine war are visible in some of the European countries.

Apple reported record profits

During the quarter, Apple reported a net profit of $25 billion and a diluted EPS of $1.52. Both these metrics were a record for the company in the March quarter. Its operating cash flows of $28.2 billion were also a new record. Notably, Apple generates a lot of cash and uses most of it for stock repurchases. The company ended the quarter with total cash and cash equivalents of $193 billion. After adjusting for the debt, it had net cash of $73 billion on its balance sheet.

Stock buybacks

During the quarter the company returned $27 billion to stockholders. Of this $3.6 billion was in dividends while $22.9 billion was through open market stock repurchases. Even Berkshire Hathaway chairman Warren Buffett has been supportive of Apple’s buybacks in the past. Berkshire itself has scaled up the buybacks and repurchased over $50 billion worth of its shares between 2020 and 2021.

Acquisition opportunities

During Apple’s earnings call, BofA analyst Wamsi Mohan asked the management whether the company would consider buying companies like Teladoc Health, Netflix, or Peloton. All these stocks have crashed from their all-time highs. Responding to the question, Apple’s CEO Tim Cook said, “We’re always looking, and we’ll — we continue to look. And — but we would only acquire something that were strategic. We acquire a lot of smaller companies today, and we’ll continue to do that for IP and for great talent. And — but we don’t discount doing something larger either if the opportunity presents itself.”

Apple’s guidance spooked investors

Apple hasn’t been providing guidance since the COVID-19 pandemic began. However, the company did provide some color on the current quarter. It said “We believe our year-over-year revenue performance during the June quarter will be impacted by a number of factors. Supply constraints caused by COVID-related disruptions and industrywide silicon shortages are impacting our ability to meet customer demand for our products. We expect these constraints to be in the range of $4 billion to $8 billion, which is substantially larger than what we experienced during the March quarter.”

The company also said that China’s COVID-19 lockdowns have taken a toll on the demand there. However, in response to an analyst’s question on high inflation dampening the demand environment in the US, Apple said that currently, supply is a bigger worry, even as it added that the supply chain issues were getting better.

Wall Street analysts see Apple stock as a buy

Evercore ISI advises investors to buy the dip in Apple stock. “Given AAPL’s comments that much of the supply issues have been resolved, we expect some of these revenues to come back as they likely create more pent-up demand for AAPL,” said analyst Amit Daryanani.

While JP Morgan analyst Samik Chatterjee lowered his target price slightly from $205 to $200, he maintained his overweight rating. “We continue to believe that there remains upside to consensus earnings and to the earnings multiple in the medium term as we see several positives from the print, including: 1) despite concerns about Apple’s ability to drive iPhone revenue growth following the early 5G adoption cycle, the robust product cycle continues to deliver upside to expectations; and 2) resilience of demand despite a pull-back in consumer spending reinforces the resilience of the portfolio given its increasing relevance to consumers, particularly exiting the pandemic,” said Chatterjee in his note.

Apple stock forecast

Wall Street analysts are largely bullish on AAPL stock and out of 43 analysts covering the stock, 32 have a buy rating while ten have a hold rating. One analyst has a sell rating on the stock. Its median target price of $190 is a 20.5% premium over current prices.

There are concerns over Apple’s valuation as it trades at an NTM (next-12 months) PE multiple of around 25.7x which is way above the historical averages. However, the multiples have come off their recent highs.

All said AAPL is among those stocks that tend to surprise on the upside more often than not. The stock should continue to do well in the medium to long term as it comes up with new products. It has anyways been a relative outperformer in 2022 as investors have pivoted towards mature yet growing tech companies.

You can buy stocks through any of the reputed online stockbrokers. Alternatively, if you wish to trade derivatives, we also have reviewed a list of derivative brokers you can consider.

Trusted & Regulated Stock & CFD Brokers

Rating

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission on real stocks

Rating

64 traders signed up today

Visit Now

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

Rating

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
Users should remember that all trading carries risks and users should only invest in regulated firms. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.