Shares of Apple (NASDAQ:AAPL) are fresh off a quarterly earnings miss, with sales slipping 5% year-over-year, marking the worst quarterly top-line decline in years. Still, Apple stock was resilient following the disappointing number, closing off Friday’s session up 2.4% in a bloody day for tech stocks. I remain bullish as Apple stock shrugs off its forgettable quarter and moves on from headwinds that are bound to fade in time.
The recent round of quarterly results themselves was nothing to write home about (weakness was broadly spread across categories). It was likely the words of management that helped soothed investor nerves, helping Apple stock outperform some FAANG rivals that also reported the previous day.
The company didn’t give formal guidance for Fiscal 2023 due to macro uncertainty. It’s noteworthy that the words “macro headwinds” were used quite a bit throughout the conference call.
In any case, I think it’s only prudent not to attempt to provide any sort of concrete guidance with recession headwinds up ahead. Despite the lack of guidance, management didn’t leave investors in the dark.
CEO Tim Cook called for year-over-year sales growth to be “similar to the December quarter.” Such words, I believe, set the bar quite low for the coming quarter and could set the stage to impress. He also stated that “from a supply chain point of view, we’re now at a point where production is what we need it to be.” That alone was likely enough to help Apple investors breathe a sigh of relief.
Apple: The Worst of the Production Issues May Have Passed
My takeaway from Cook’s comments was that the worst of production headwinds may already be in the rearview mirror. Indeed, the next quarter could see iPhone revenue growth in the red. However, the second half could see Apple make up for lost time as production gets up to full speed while Apple users finally look to upgrade.
Indeed, Apple can afford to have some sizeable supply-side hiccups without losing too much business. At the end of the day, customer loyalty is unparalleled, with many Apple users that will opt not to switch to a competing product, even if it means having to endure longer wait times.
Lockdowns in China have weighed heavily on operations. Still, I am confident that Cook can promptly bring production back in order. The man is an operational genius who’s effectively ironed out supply-chain wrinkles in the past.
Once Apple moves past the current barrage of headwinds, it’ll likely be right back to gaining meaningful market share in the smartphone market again. Further, amping up efforts to expand into India, a market where Apple is reportedly enjoying double-digit growth, could help fuel such market gains.
Apple’s Rough Quarter is Easy to Forgive
There’s no question that Apple was up against it going into what many expected would be a rough quarter. Going into the quarter, estimates were muted, thanks in part to manufacturing woes from China’s COVID-19 lockdowns, currency headwinds, and the weak macro environment. Still, Apple managed to miss the mark on both fronts. It wasn’t a pretty scene initially. That said, Apple didn’t fare too terribly, given how prominent the storm of headwinds was.
Upon the release of Apple’s numbers, the immediate reaction was negative, with the stock falling around 5%-6% after hours before climbing higher, following some management commentary and time to digest the results.
The weakness was widespread across the board. iPad ($9.4 billion revenue) and services ($20.7 billion revenue) were bright spots, which managed to surpass estimates of $7.7 billion and $20.4 billion, respectively.
On a constant-currency basis, Apple noted that sales would have been up. As the strong U.S. dollar loses ground to global currencies, the currency headwind could turn into a tailwind for future quarters.
Is Apple Stock a Buy, According to Analysts?
Turning to Wall Street, AAPL stock comes in as a Strong Buy. Out of 29 analyst ratings, there are 24 Buys and five Hold recommendations. The average Apple stock price target is $172.87, implying upside potential of 13.6%. Analyst price targets range from a low of $125.00 per share to a high of $210.00 per share.
Conclusion: AAPL Can Move on from a Rough 2022
Apple stock was a roller-coaster ride on earnings. However, looking ahead, operations should get smoother, and the much-anticipated reveal of a VR/AR headset could be a wild card. In any case, I think it’s wise to stick with Apple following a forgivable and forgettable quarter.