Case Study: What Credible analysts are saying on Apple (AAPL) stock
Key Points
Performance
Apple (AAPL) shares fell by 0.21% this week. They’re down by 28.6% on a year-to-date basis. This compares poorly to the S&P 500, which is down by 19.4% during 2022 thus far. FedEx (FDX) shares have risen by 2.56% this week. However, on a year-to-date basis, they’re still down by 31.96%. This compares poorly to the S&P 500, which is down by 19.84% during 2022 thus far.
Event & Impact
Apple shares hit new 52-week lows this week, causing the stock to end the year surrounded by negative sentiment. FedEx posted its second quarter earnings this week, beating Wall Street’s estimates on the bottom line, but missing consensus revenue estimates. Persistent macroeconomic headwinds continue to hurt the company’s international air freight business, which posted -64% volume growth during the quarter.
Noteworthy News:
Although Apple posted record data during its Q4 earnings report, the stock has sold off in recent weeks because of fears surrounding COVID-19 lockdowns and iPhone production in Chinese facilities.
Nobias Insights
50% of recent articles published by credible authors focused on AAPL shares offer a “Neutral” bias.. However, 11 out of the 13 credible Wall Street analysts believe shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $186.82, which implies upside potential of approximately 45.5% relative to Apple’s current share price of $128.42.
Bullish Take Harsh Chauhan, a Nobias 4-star rated author, said: “In fiscal 2022 (which ended on Sept. 24, 2022), Apple reported services revenue of $78 billion. The segment's revenue jumped 14% year over year and accounted for nearly 20% of the company's top line.”
Bearish Take Patrick Seitz, a Nobias 4-star rated author, said, “Apple's production and supply issues related to iPhone 14 Pro handsets led many analysts to slash their sales and earnings forecasts for the company's December quarter.”
AAPL Dec 2022
Apple (AAPL) shares hit fresh 52-week lows this week. The stock rallied during Thursday’s and Friday’s trading sessions and ended up down just 0.21% during the week. However, on a year-to-date basis, Apple shares have fallen by 28.61%, making 2022 one of its worst years in recent memory.
Apple experienced significant weakness recently, which might be surprising to some, because the company set records during its last quarterly earnings report. However, ongoing supply chain issues and threats of a production slowdown in its Chinese manufacturing facilities have caused concern for investors when it comes to device sales during the coming quarters.
Bearish Nobias Credible Analysts Opinions:
Patrick Seitz, a Nobias 4-star rated author, recently wrote an article at Investors.com which discussed Apple’s recent share price weakness. He wrote, “Covid pandemic lockdowns and worker protests in China in November and December had slashed the availability of those popular iPhone 14 models.”
Seitz continued, “Apple's production and supply issues related to iPhone 14 Pro handsets led many analysts to slash their sales and earnings forecasts for the company's December quarter.” He also noted, “Analysts polled by FactSet now expect Apple to earn $1.98 a share on sales of $123.5 billion in its fiscal first quarter. That would translate to year-over-year declines of 6% in earnings and a fraction for sales.” However, he provided some bullish news for investors, stating, “JPMorgan analyst Samik Chatterjee said his firm's channel checks indicate an improved supply of premium models of the latest iPhones.”
Wesley Hilliard, a Nobias 4-star rated author, also recently covered Apple’s supply chain issues and its China market share in a report published at Apple Insider. He wrote, “The entire smartphone market in China is getting hit badly, but Apple is gaining marketshare with the iPhone 14 despite lower shipments than 2021.”
Hilliard continued, “Supply issues in China have greatly impacted iPhone 14 Pro availability since shortly after its release in September. Shipping times have improved since then, but Apple is still set to see a total decline in iPhone sales as a result.”
Regarding Apple’s Chinese market share, Hilliard said, “In 2021 it was at about 21% market share and is at 22% market share in 2022.” In other words, he concluded, “Since iPhone demand decreased at a slower rate, Apple was able to take more market share.”
Bullish Nobias Credible Analysts Opinions:
Harsh Chauhan, a Nobias 4-star rated author, recently published a bullish article on Apple at the Motley Fool, titled, “The Biggest Reason Apple Stock Is a Screaming Buy for 2023”. Throughout his piece, Chauhan highlighted Apple’s service segment as the primary bullish catalyst for shares moving forward. He wrote, “A forgettable year is drawing to a close for Apple investors, who have faced the broader stock market selloff despite the company's resilient performance amid a weak smartphone market. But 2023 could turn out to be a much better year for the tech giant, as one of its key businesses is likely to step on the gas.”
With specific regard to Apple’s services, Chauhan said, “In fiscal 2022 (which ended on Sept. 24, 2022), Apple reported services revenue of $78 billion. The segment's revenue jumped 14% year over year and accounted for nearly 20% of the company's top line.”
Chauhan noted that during the first quarter of 2021, Apple’s management highlighted “a massive installed base of 1.8 billion active devices”. Chauhan continued, saying that it wouldn’t “be surprising to see the company sitting on an installed base of 2 billion active devices, given the healthy demand for iPhones and other devices” when it reports its next quarter.
Looking forward, he wrote, “IDC estimates that 233.5 million iPhones may be shipped in 2023, which would be a slight increase over this year's estimated production target of 220 million units. This also suggests that the installed device base is set to increase once again next year.”
Chauhan added, “A bigger base of installed devices means that Apple can sell its services to more users.” And, as the company has shown in recent quarters, services growth supercharges the company’s bottom-line.
Chauhan said, “Apple's services business delivered a gross margin of 70.5% last quarter. He continued, “That's more than double the product gross margin of 34.6% and significantly higher than Apple's overall gross margin figure of 42.3% last quarter.”
Margin expansion can lead to earnings-per-share growth even as revenues stagnate, but that's not what Chauhan expects to see in 2023. Chauhan estimates that Apple could generate approximately “$100 billion in revenue in 2023”. And therefore, he concluded, “That could help Apple overwhelm Wall Street's expectations in the new year and send its shares soaring, which is why investors may want to take advantage of the 25% decline this tech stock has witnessed in 2022 and buy it before it breaks out.”
Shanthi Rexaline, a Nobias 4-star rated author, highlighted the extent of Apple’s share price weakness and the potential upside that shares offer contrarian investors now moving forward in an article published this week at Benzinga.
Rexaline said, “Apple’s stock peaked at $182.94 at the start of the year (Jan. 4 intraday high), thanks to strong uptake of the new iPhone 14 iterations, especially the high-margin Pro models. Since then, it has been tossed and turned by the macroeconomic vagaries and the COVID-19 recurrences in China.” She continued, “Apple shares fell to a fresh 52-week low of $125.87 on Wednesday, the lowest since the June 7, 2021, intraday low of $124.83.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Regarding AAPL’s upside potential, she wrote, “A $1,000 invested at Thursday’s closing price of $129.61 would fetch 7.7 Apple shares. If the stock charts another uptrend, as fundamentals improve and the broader market sentiment takes a turn for the better, there is all likelihood of it retesting its all-time high of $182.94. At that price point, the 7.7 stock holding would be worth $1,412, a return of 41%.”
And, looking at the consensus price target for Apple shares across the analyst community, it appears that such a rebound is possible. Rexaline concluded, “The average analysts’ price target for Apple stock is $179.10, according to TipRanks, is $179.10, suggesting a 38% upside from current levels.”
Overall bias of Nobias Credible Analysts and Bloggers:
Looking at the average price target that the credible analysts that the Nobias algorithm tracks have for Apple, there is even more upside potential. 11 out of the 13 credible analysts that Nobias tracks believe that AAPL shares are likely to increase in value. Right now, the average credible analyst price target is $186.82. Relative to Apple’s year-end share price of $128.42, that average price target represents upside potential of approximately 45.5%.
Disclosure: Nicholas Ward is long AAPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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