Case Study: Apple (APPL) stock according to high performing analysts
Key Points
Performance
Apple shares rose by 2.45% this week, pushing their year-to-date gains down to 38.78%. This compares favorably to the S&P 500 and the Nasdaq Composite Index, which are up by 8.16% and 17.8% on the year thus far.
Event & Impact
Apple posted its fiscal 2023 second quarter results this week, beating consensus estimates on both the top and bottom lines. During Q2, Apple’s revenue totaled $94.84 billion, beating Wall Street’s consensus estimate by $2 billion. Apple’s Q2 GAAP earnings-per-share came in at $1.52 which was $0.09/share above consensus estimates.
Noteworthy News:
Apple beat top and bottom-line estimates, showing strength in its iPhone and Service operating segments. The company also announced its annual shareholder return program, raising its dividend by 4% and adding $90 billion to its buyback authorization.
Nobias Insights
49% of recent articles published by credible authors focused on AAPL shares offer a “neutral” bias. However, four out of five credible Wall Street analysts who cover Apple believe that shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $173.60, which is essentially in line with the stock’s current share price of $173.57.
Bullish Take Nobias 5-star rated author, Max Cherney, said, “Apple also raised its quarterly dividend 4% to 24 cents a share. That marked the eleventh year in a row it's increased that payout”
Bearish Take Luke Lango, a Nobias 4-star rated author, said, “Apple reported that its revenues dropped 2.5% in Q1. Last quarter, revenues dropped about 5%. And the company said revenues will drop again in Q2 as well.”
AAPL May 2023
Apple reported its fiscal 2023 second quarter earnings results this week, causing this $2.7 trillion company to rally to new 52-week highs. When it reported results after the closing bell on Thursday, Apple beat Wall Street’s expectations on both the top and bottom lines during Q2.
The company also announced a dividend increase and a new $90 billion buyback authorization. And although the company’s top-line results signaled slowing growth, the market was pleased with the report overall.
Apple shares rallied by 4.69% on Friday. On the week, Apple shares rose by 2.45%, pushing their year-to-date gains up to 38.78%. Therefore, throughout 2023 thus far, Apple has outperformed both the S&P 500 and the Nasdaq Composite Index, which are up by 8.16% and 17.8% on the year, by wide margins.
Bullish Nobias Credible Analysts’ Opinions:
Rida Imran, a Nobias 5-star rated author, covered Apple’s second quarter earnings results in an article that she published at I Think Different this week. Imran wrote, “Apple has published its earnings report for the second quarter of 2023 with $94.8 billion in revenue. In comparison to the same quarter the previous year, Apple saw a 3% year-on-year decline. However, its quarterly earnings per diluted share of $1.52 remained unchanged.”
Looking at the company’s top-line results, she said, “For Q2, 2022, Apple recorded an impressive quarter with a revenue record of $97.3 billion with a 9% Y-o-Y and quarterly earnings per diluted share of $1.52.” Also, Imran put a spotlight on Apple’s product sales segment results, writing:
iPhone – $51.334 billion (Up from $50.570 billion for the same quarter the previous year)
Mac – $7.168 billion (Down from $10.435 billion for the same quarter the previous year)
iPad – $6.670 (Up [sic] from $7.646 billion for the same quarter the previous year)
Wearable, Home, and Accessories – $8.757 (Slightly down from $8.806 billion for the same quarter the previous year)
Services – $20.907 (Up from $19.821 for the same quarter the previous year)
After examining Apple’s Q2 data, Bank of America analyst, Wamsi Mohan, who carries a Nobias 4-star rating, raised their price target for Apple shares. According to The Fly on the Wall, “BofA analyst Wamsi Mohan raised the firm's price target on Apple to $176 from $173 and keeps a Neutral rating on the shares. Apple executed well and "delivered decent performance," says the analyst, who sees "lots to like," along with "some concerns" from the company's earnings report and call. The firm's FY23 revenue and EPS estimates move up to $386B and $5.98 from $385B and $5.89, respectively, but BofA remains concerned about weak consumer spending and weak end market demand.”
The Fly on the Wall also reported that Nobias 4-star rated analyst, Ananda Baruah of Loop Capital, maintained their “Buy” rating no Apple shares, stating, “Loop Capital keeps a Buy rating and $180 price target on Apple after its better than expected Q2 results but also notes that the firm remains concerned by the company's potential softening in Q3. The analyst states that iPhone unit shipments are off to a slow start and actually tracking softer than originally anticipated, adding that it is "not clear" why Apple shares were up 2% afterhours following its earnings.”
Bearish Nobias Credible Analysts Opinions:
However, despite the stock’s strong post-earnings rally, not everyone who analyzed Apple’s Q2 report came away with a “Bullish” sentiment. Luke Lango, a Nobias 4-star rated author, published a post-earnings report this week which highlighted Apple’s relatively poor growth. He wrote, “Apple reported that its revenues dropped 2.5% in Q1. Last quarter, revenues dropped about 5%. And the company said revenues will drop again in Q2 as well.” “SImply put”, he added, “The company isn’t growing anymore.” “With a $2.5 trillion market cap, Apple stock’s days of scoring investors 10X-plus returns is behind it,” he said.
Lango put a spotlight on Apple’s illustrious history; however, he noted that the smartphone market is mature and therefore, Apple is going to struggle to grow unless it launched a new, innovative product. “Indeed,” he said, “smartphone penetration in the U.S. is 85%. And given how long the iPhone has been around, it’s highly unlikely that the 15% of Americans who are smartphone holdouts suddenly give in over the next few years.”
Regarding the sales growth momentum of Apple’s largest product, Lango wrote, “The number of iPhones sold per year by Apple soared from 11.6 million in 2008 to 231.2 million in 2015. Since then, annual unit sales have plateaued between 200- and 240 million units per year.
But, Lango also provided hope for investors, writing that an Apple car could be a game changer for this big-tech stock. He writes that Apple has been working on “Project Titan”, which is its secret car project, for years and today, he sees parallels between the iPhone launch and the electronic vehicle market today. “In 2007, smartphone penetration rates in the U.S. were about 10%. Last year, global EV penetration rates were about 10%,” Lango wrote. “The company has learned from its success with the iPhone. The key to driving long-term growth through a revolutionary product is to launch when that tech’s adoption is around 10%,” he added.
Lango concluded that an Apple car will be “a hit”; however, he says that investors should buy Apple suppliers - meaning the companies who supply the markets required to manufacture a product - instead of Apple shares due to the stock’s large market cap and its relatively limited upside.
Although Lango is cautious on Apple’s future, Nobias 5-star rated author, Max Cherney, notes that Apple’s management team is not. Cherney published an article this week highlighting Apple’s $90 billion repurchase authorization that was announced during its Q2 report. “Apple Inc. plans to buy back another $90 billion worth of it [sic] stock,” he said.
“The iPhone maker's board authorized the new buyback money due to "our confidence in Apple's future and the value we see in our stock," Luca Maestri, it [sic] chief financial officer, said in a press release,” Cherny continued. He notes that buybacks are a regular part of Apple’s capital allocation plans.
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.
Cherney said, “Apple spent $90.2 billion on stock repurchases in its last fiscal year and another $39 billion in this [sic] first half of its current fiscal year.”“In addition to increasing its buyback program,” he added, “Apple also raised its quarterly dividend 4% to 24 cents a share. That marked the eleventh year in a row it's increased that payout, Maestri said.”
Overall bias of Nobias Credible Analysts and Bloggers:
So, while growth is slowing, Apple’s shareholder return figures continue to rise. Overall, 49% of recent articles published by credible authors on Apple shares have expressed a “neutral” outlook, implying that after Apple’s nearly 39% year-to-date rally, shares are fully valued.
This sentiment is shared by the credible analyst community that the Nobias algorithm tracks as well. Four out of the five credible analysts that we track who recently covered AAPL shares believe that they’re likely to increase in value. However, the average price target being applied to Apple by these credible analysts is $173.60 which is essentially in-line with the stock’s current share price of $173.57.
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.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
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.