Source: PaxForex Premium Analytics Portal, Fundamental Insight
Apple has long been the company that Wall Street likes to loathe. Sure, there are plenty of fans of the iPhone maker, but as soon as any unfavorable factors appear, analysts scatter as everyone starts predicting that Apple has reached the end of its growth phase and its glory days are behind it.
Until the next earnings report, when so-called surprises are inevitable as to how solid its business really is.
For example, iPhone sales plunged 8.1 percent to $65.8 billion in fiscal Q1, and Apple's overall revenue growth was the slowest since 2016, and many are generally saying that the tech giant's future has diminished.
So where will Apple be in a few years? Will it give up, as its detractors say, or will it be able to overcome obstacles and continue its long-term growth trajectory? Most still put themselves in the latter camp, and here's why.
Admittedly, Apple's earnings report was a bit disappointing, but not necessarily unexpected. iPhone sales, for example, can actually be considered better than they should have been, given the supply chain constraints the consumer electronics giant has faced.
Foxconn, the largest iPhone assembler for Apple, was under severe pressure due to plant closures in major Chinese cities, with employees forced to sleep in the factory because of travel restrictions. But after China lifted the restrictions, Foxconn quickly restored much of its production and reported revenue for January reached a record $22 billion.
Likely iPhone sales were only pushed back for the quarter ending in March, and production rose again, with CEO Tim Cook telling analysts that production "is where we want it to be right now."
While Mac revenues also fell hard in the first quarter and sales of wearable devices declined, iPad sales rose sharply, so there doesn't seem to be a broad consumer demand problem. The main problem is supply, and it has, for the most part, normalized.
Despite the problems Apple faced, it was still growing relative to the industry as a whole, taking market share while the industry was shrinking, including the iPhone industry. According to Gartner analysts, the decline in PC sales was stronger than the decline in Mac shipments, at least by a ratio of 2 to 1. In fact, it was "the steepest annual drop in shipments in the history of Gartner's PC tracking."
Mac shipments were down 10% over that period, but the best PC maker was Asus, whose shipments were down 19%. For all of 2022, Apple was the only manufacturer to see growth. Apple's market share rose to 10.7% from 8.6%.
The situation is similar in wearable devices, where Apple maintains a huge advantage over its competitors and has more than twice the market share of its closest rival. Apple Watch has a 26% share, compared to Samsung's 12%.
Overall, Apple's installed base has more than 2 billion active devices, double that of seven years ago.
And if we're looking at Apple's future, it's noteworthy that services revenue for the quarter hit a record high of nearly $21 billion. This division covers the App Store, Apple Pay, and various subscription services such as iCloud, Apple TV+, and Apple Music.
Last year was a record year for the App Store, as the number of subscriptions rose 21% to 900 million from 745 million the year before. And while service revenue growth slowed to 14% in 2022 from the 27% seen in 2021, that period was part of the pandemic boom enjoyed by Apple and other companies. This, like the supply chain situation, is just a return to the mean.
Although Apple stock has rebounded 22% from the lows it reached in late December, it is still 15% below its August highs. And while this means that Apple was a better buy in early 2023 than it is today, relatively speaking, the tech company's stock is still a great business to own -- with plenty of growth still to come, whether in three years or 10 years.
As long as the price is above 141.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 150.40
- Take Profit 1: 155.00
- Take Profit 2: 163.00
Alternative scenario:
If the level of 141.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 141.00
- Take Profit 1: 137.00
- Take Profit 2: 134.00
