Apple (AAPL) stock popped after better-than-expected iPhone sales helped it beat Wall Street's quarterly profit and sales estimates – and analysts say shares in the mega-cap tech giant are just getting started.
Apple stock jumped more than 5% at one point in early Friday trading thanks to upbeat fiscal second-quarter results released the previous evening. As a company with a market capitalization of more than $2.6 trillion at the beginning of the session, a 5% increase in Apple's stock price adds more than $130 billion in value to one of analysts' top Dow stocks.
For the three months ended April 1, Cupertino, California-based Apple reported earnings of $1.52 a share, easily topping analysts' forecast for earnings per share (EPS) of $1.43, according to S&P Global Markets Intelligence. Revenue declined 3% to $94.8 billion, vs the Street's estimate for revenue of $92.8 billion.
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"We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high," Apple CEO Tim Cook said in a press release.
The global smartphone market suffered a 15% decline in shipments during the first three months of 2023, according to market researcher IDC, and Apple was expected to go along for the ride. But unexpected strength in iPhone sales – quarterly segment revenue increased 2% year-over-year – helped Apple exceed the Street's expectations.
Also boosting Apple stock were additional efforts to return more cash to shareholders. Apple upped its dividend by 4% to 24 cents per share quarterly. Furthermore, Apple's board of directors authorized an additional program to buy back up to $90 billion of AAPL stock.
Apple stock: Buy, Hold or Sell?
(Image credit: Getty Images)
Apple stock has rallied an almost incomprehensible 33% for the year-to-date, adding roughly $680 billion in market value. To put that in perspective, including Apple, only five companies in the S&P 500 have market caps of more than $680 billion.
And yet the Street says shares have plenty of upside left. Of the 45 analysts issuing opinions on Apple stock surveyed by S&P Global Market Intelligence, 25 rate it at Strong Buy, nine say Buy, nine call it a Hold, one says Sell and one rates it at Strong Sell. That works out to a consensus recommendation of Buy, with high conviction.
We'll let Oppenheimer analyst Martin Yang sum up the bullish investment thesis for Apple stock: "We expect Apple's defensive moats to strengthen under the challenging macro backdrop, resulting in long-term, sustainable share gains in hardware and services."
Yang rates AAPL at Outperform (the equivalent of Buy), and raised his price target to $195 from $170. The new price target gives Apple stock implied price upside of 13% in the next 12 months or so.
For context, the Street's highest price target of $210 gives Apple stock implied upside of 20%. At the other end of the range, Apple stock would have to fall 33% from current levels to hit the Street's lowest price target, which stands at $116.
True, Apple beat a pretty low bar for estimates. But it did so resoundingly, and very much relied on the "sticky" ecosystem of products and services that no less an investing luminary than Warren Buffett praises.
Don't forget: the chairman and CEO of Berkshire Hathaway (BRK.B) calls Apple his "third business." That's why Apple is the Oracle of Omaha's top stock pick, accounting for nearly 40% of the Berkshire Hathaway stock portfolio.
As one of the best stocks of the past 30 years – and a name that has generated stupendous wealth for anyone who bought Apple stock 20 years ago – it certainly is hard to bet against Apple.
As an expert in financial markets and stock analysis, my deep understanding of the subject matter allows me to provide insightful analysis and commentary on the recent developments in Apple Inc. (AAPL) stock.
The recent surge in Apple stock, propelled by better-than-expected iPhone sales, is a testament to the company's resilience and market dominance. The quarterly profit and sales results exceeded Wall Street's estimates, leading to a substantial increase in Apple's stock price. This demonstrates the continued strength of Apple as a mega-cap tech giant, with a market capitalization exceeding $2.6 trillion.
Analyzing the financials, Apple reported earnings of $1.52 per share for the fiscal second quarter, surpassing analysts' expectations of $1.43 per share. Despite a 3% decline in revenue to $94.8 billion, the company outperformed the Street's estimate of $92.8 billion in revenue. The ability to exceed projections even in a challenging macroeconomic environment reflects Apple's robust business model.
One notable factor contributing to Apple's success is its iPhone sales performance. In a global smartphone market that experienced a 15% decline in shipments during the first three months of 2023, Apple defied expectations with a 2% year-over-year increase in quarterly segment revenue from iPhone sales. This unexpected strength in iPhone sales played a crucial role in surpassing market forecasts.
Additionally, Apple's commitment to returning value to shareholders has positively influenced its stock performance. The company increased its dividend by 4% to 24 cents per share quarterly and authorized a share buyback program of up to $90 billion of AAPL stock. These efforts contribute to the overall attractiveness of Apple as an investment.
Looking at the stock's trajectory, Apple has seen a remarkable 33% year-to-date rally, adding approximately $680 billion in market value. This outstanding performance is underscored by the fact that only five companies in the S&P 500 have market caps exceeding $680 billion. Despite this significant increase, analysts remain bullish on Apple's prospects, with a consensus recommendation of Buy from surveyed analysts.
Notably, Oppenheimer analyst Martin Yang, who rates AAPL at Outperform, raised his price target to $195 from $170, implying a 13% upside in the next 12 months. The overall sentiment on Wall Street is optimistic, with the highest price target reaching $210, indicating a 20% potential upside.
Warren Buffett's endorsem*nt adds another layer of confidence in Apple's future performance. As the "Oracle of Omaha," Buffett considers Apple his "third business" and the top stock pick, constituting nearly 40% of the Berkshire Hathaway stock portfolio.
In summary, Apple's recent financial results, strategic initiatives, and market performance position it as a formidable player in the tech industry with continued growth potential. The consensus among analysts and influential investors reinforces the belief that Apple's success story is far from over, making it a compelling choice for investors.
