Case Study: What Credible analysts are saying on Apple (APPL) stock
Key Points
Performance
Apple shares rose by 6.61% this week, pushing their year-to-date gains up to 23.53%. This compares favorably to the S&P 500 and the Nasdaq Composite index, which are up by 8.17% and 15.6%, respectively, during 2023 thus far.
Event & Impact
Apple announced fiscal 2023 first quarter earnings this week, missing Wall Street’s estimates on both the top and bottom lines. AAPL’s revenue during Q1 came in at $117.15 billion, down by 5.5% on a year-over-year basis, missing Wall Street’s consensus estimate by $4.5 billion. The company’s GAAP earnings-per-share totaled $1.88, missing consensus estimates by $0.07/share.
Noteworthy News:
Apple’s management cited foreign exchange issues, as well as ongoing production/demand issues in China as recent headwinds. Yet, the company still generated $36 billion in operating income during the first quarter.
Nobias Insights
68% of recent articles published by credible authors focused on Apple shares offer a “bearish” bias. 2 out of the 4 credible Wall Street analysts who cover AAPL believe shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $169.67, which implies upside potential of approximately 9.8% relative to the stock’s current share price of $154.50.
Bullish Take Vlad Savov, a Nobias 5-star rated author, said, “Apple’s iPhone set a new high for its share of profits from global smartphone sales in 2022, after navigating a dire year for the industry better than competitors.”
Bearish Take Deanna Walker, a Nobias 4-star rated author, said, “Both Apple’s earnings and revenue missed analyst expectations, citing a strong dollar, production issues in China and a headwind in the macroeconomic environment for its various businesses.”
AAPL Feb 2023
Apple reported fiscal 2023 first quarter earnings this week, missing on both the top and bottom lines. In the after hours trading session on Thursday evening, AAPL shares fell roughly 4% on the heels of this report. However, during the normal trading session of Friday they bounced back, ending the day up by 2.44%. These gains pushed Apple’s year-to-date price gains up to 23.53%. This means that the tech giant (Apple’s current market capitalization sits at $2.39 trillion) has outperformed both the S&P 500 and the Nasdaq composite by wide margins thus far in 2023.
On a year-to-date basis, the S&P 500 is up by 8.17%, while the Nasdaq has risen by 15.60%. These gains are welcomed by Apple bulls after the stock’s tough year in 2022. Even after Apple’s nearly 25% 2023 rally, the stock is still down by 10.64% during the trailing twelve month period.
Bearish Nobias Credible Analysts Opinions:
Deanna Walker, a Nobias 4-star rated author, covered Apple’s Q1 report in an article that she published at Business News this week. Walker wrote, “Both Apple’s earnings and revenue missed analyst expectations, citing a strong dollar, production issues in China and a headwind in the macroeconomic environment for its various businesses.” She went on to highlight important metrics from the company’s report, stating:
Earnings: $1.88 vs. $1.94 estimated, down -10.9% year over year
Revenue: $117.15 billion vs. $121.10 billion estimated, down -5.49% year over year
iPhone revenue: $65.78 billion vs. $68.29 billion estimated, down -8.17% year over year
Mac revenue: $7.74 billion vs. $9.63 billion estimated, down -28.66% year-over-year
iPad revenue: $9.4 billion versus $7.76 billion estimated, up 29.66% year over year
Services revenue: $20.77 billion versus $20.67 billion estimated, up 6.4% year over year
No guidance provided from Apple management
Walker did note that, “The one bright spot in the report was Apple Services revenue.” She continued, “Services is a departure from Apple’s bread and butter in hardware, but provides a high-margin, cash machine to diversify Apple’s income.”
Walker also mentioned Apple’s iPad segment as an area of the business with bullish tailwinds at play. She said, “All other hardware saw YoY decreases, including iPhones and Macs, but the iPad experienced a big bump. The iPad brought in $9.4 billion, which was a 30% YoY increase, and was partly attributed to the new cheaper iPad introduced as a part of the product lineup.”
“Another big highlight from Cook was the disclosure of figures for total active Apple devices,” said Walker. She continued, “Apple now has 2 billion active devices, including everything from iPhones to iPads and Mac computers.
Concluding her piece, she stated, “Even though Apple had a tough quarter, the future is still bright.” Walker noted, “Annual sales are projected to grow from $274 billion in 2020 to nearly $400 billion in 2022. That should cheer investors who are skeptical of Apple.” And, she points out, these rising sales allow the company to sustainably return a significant amount of cash to shareholders.
Walker said, “During the quarter, Apple returned $25 billion through dividend payments ($3.8 billion), and share repurchases ($19 billion).” Finally, she added, “Even in the face of a slowing economy, AAPL stock is practically as good as long-term Treasury bonds.”
Patrick Seitz, a Nobias 4-star rated author, touched upon Apple’s recent sell-off and the company’s forward looking growth drives in a recent article titled, “Is Apple Stock A Buy After December-Quarter Earnings Miss?” Seitz put a spotlight on Apple’s storied history, stating, “In January 2022, Apple hit a market value of $3 trillion when its shares reached 182.86. It was the first company to reach a market capitalization of $3 trillion.” But, he notes, the stock has lost roughly 33% of its value since then and now investors are wondering what Apple’s next big idea will be?
Seitz stated, “The biggest driver of Apple's modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.”
Yet, he noted that the handset industry has matured and stated,”With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.” “Recently,” he continued, “two businesses have given Apple's sales and profits a boost: services and wearables.”
Seitz said, “In the December quarter, Apple's services revenue rose 6% year over year to $20.77 billion. Meanwhile, its hardware sales declined 8% to $96.39 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.”
Furthermore, he added, “News leaks suggest that Apple will announce a headset for virtual reality and augmented reality in 2023. The computer headset could be a driver of Apple stock, analysts say.” Seitz went on to note the stock’s poor performance recently, leading to unattractive momentum trading signals. With that in mind, he concluded, “Apple stock is not a buy right now.”
Bullish Nobias Credible Analysts Opinions:
In a recent article, Vlad Savov, a Nobias 5-star rated author, also touched upon the maturing smartphone business globally; however, his take away from Apple’s recent results was more bullish than Seitz’s.
Savov said, “In 2022, worldwide smartphone shipments fell by double digits, most severely in China, and those profits dwindled for the majority of companies.” Yet, he noted, “Apple’s iPhone set a new high for its share of profits from global smartphone sales in 2022, after navigating a dire year for the industry better than competitors.”
Savov continued, “The Cupertino, California-based tech giant [referring to Apple] collected 85% of operating profit and 48% of revenue from smartphone sales over the course of the year, new Counterpoint Research estimates showed.” He also said, “Apple’s 2022 performance comes despite its worst holiday performance in four years, after supply snags and a softening economy hurt iPhone revenue.”
This provides a potential bullish catalyst in the current quarter, said Savov. He also stated, “The Covid restrictions in China added to Apple’s woes, making it harder to ship enough of the most popular versions of the iPhone.”
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.
But, with regard to the recent China issues, Savov quoted Meng Zhang, analyst at Counterpoint Research, who views the COVID-19 related shutdowns as a potential near-term growth catalyst for the iPhone.
Savov wrote, “A more than 20% smartphone sales rise during the first two weeks of January could be due to pent-up demand from the prior two months, when the pandemic limited mobility in China, she said.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, there is a bull/bear split between the credible author and analyst communities that the Nobias algorithm tracks when it comes to Apple shares. 68% of recent articles written about the stock by credible analysts (those with 4 and 5-star ratings) have expressed a “bearish” bias towards the stock.
However, the average price target that is currently being applied to Apple by the credible Wall Street analysts that the Nobias algorithm tracks (once again, individuals with Nobias 4 and 5-star ratings) is $169.67, which implies upside potential of approximately 9.8% relative to Apple’s share price of $154.50.
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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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.