After A Shaky Start To 2023, Apple Is Back On Track

Amid a shaky start to the year, Apple Inc.'s stock has once again regained its title as the most sought-after investment in the big tech industry, even gaining the support of Goldman Sachs Group Inc. after years in which the brokerage has refrained from recommending the company's stock.

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Cupertino, California-based Apple has risen about 15% in 2023, its biggest quarterly gain in over a year. Among other mega-cap technology companies like Amazon.com Inc., Alphabet Inc., and Microsoft Corp., the stock is outperforming. 

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It has turned out that fears about a potential drop in demand for Apple's pricey computers and iPhones, as well as supply bottlenecks, have dissipated. After spending most of the past six years on the sidelines as the stock more than quadrupled in value, Goldman turned bullish on the stock this week for the first time in almost six years. 

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“With Apple's solid balance sheet, talented team, and innovative capabilities, investors may consider it a safe place to park equity exposure,” said David Waddell, chief investment strategist at Waddell and Associates.

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Back in December, the picture looked gloomy for Apple: a fresh wave of Covid infections in China forced Apple's major assembly partner to shut down production of iPhones in the run-up to the company's biggest quarter ever. It plunged to a 19-month low in early January, and the company's market value has dropped below $2 trillion for the first time since March 2021 as a result.

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Shares of all high-valued technology companies were also suffering from the Federal Reserve's interest rate increases, while concerns were growing that the economy might fall into recession, affecting sales of computers and phones.

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It seems that the factory is now back online, the supply chain snarls have dissipated, and the demand for the products is holding up.

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Kyle McNealy, a Jefferies analyst who saw data on the amount of traffic on the company's website by consumers looking to buy iPhones, wrote in a note last week that Apple is also experiencing limited impact from economic pressures. In his opinion, that may indicate that expectations for handset sales may be too low, and that should be considered.

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Michael Ng, an analyst at Goldman Sachs who has just taken over the firm's coverage of the stock and assigned it a buy rating, says that the company's large user base will also allow it to expand its services unit as it continues to expand its services unit. In the last ten years, Apple Music, Apple TV+, and the App Store have grown to account for about a fifth of the company's total revenue, and their shares have doubled over the course of the period.

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Other business units also have strong growth drivers, according to analysts. It is estimated that by 2024, Apple will sell 22 billion AirPod earphones, which would be equal to Mastercard's entire revenue last year, according to Trade Algo. 

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As the Federal Reserve warns that aggressive hikes in interest rates may need to be re-accelerated, investors are looking at a stock that has been able to weather uncertain times well in the past.

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Apple's stock has been repurchased by the company in the last 12 months for a total of $88 billion, which is a significant amount of money. It is the highest amount of shares purchased by any US company and almost more than the combined amount of shares purchased by its two closest rivals, Alphabet Inc. and Meta Platforms Inc., according to data compiled by Trade Algo.  

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Despite the fact that the stock is by no means cheap, when compared to the 35 times it traded during the pandemic, trading at 24 times forward earnings has made it seem much more reasonable. In accordance with Trade Algo's average price target, analysts expect the stock to rise about 13% over the next 12 months, based on what they expect it to achieve. 

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Iphones Get Rare Sell Rating With LightShed Cautious

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In 2013, Apple's share repurchases surpassed those of Exxon Mobil Corp., making it the company that has made the most annual share repurchases in the S&P 500 index in terms of share repurchases. It has remained the top spender on its own stock, typically increasing its repurchase program in conjunction with its fiscal second-quarter earnings update, which means there is a good chance the next increase will come in the month of April.