Even the mighty Apple couldn’t escape the black hole that stocks have been sucked into in recent months.
Apple stock is down about 22% year-to-date, lagging the 19.5% drop in the Dow Jones Industrial Average.
The pressure on Apple’s shares — coming despite an impressive cash position and robust recurring revenue streams across various services — reflects investors’ concerns about the global economic slowdown, which has reportedly prompted Apple to halt production of some models of its new iPhones -Throttle suite.
“This negative news in an already shaky macro and jittery market will clearly send shockwaves down the street as investors worry this is yet another shoe to buy in this dark market with the golden child Apple front and center mid,” said Wedbush analyst Dan Ives, reporting cuts in iPhone production.
All in all, Citi analyst Jim Suva stands by the company’s Oct. 27 earnings despite mounting fears about Apple stock.
“Despite Halloween and investor fears, we are not afraid of Apple shares,” Suva said bluntly in a new customer statement.
Here’s more behind Suva’s hot version of Apple:
Looking beyond a potentially mixed quarter from Apple, Suva is betting on several key longer-term drivers, including the potential release of a foldable iPhone in 2023.
“1) Reviews suggest the iPhone 14 build is still on track for 2H expectations of ~90M units and we expect a foldable phone in 2023; 2) Mix shift continues to shift from lower-priced Android phones to more mid-end and premium-priced products; 3) A ~$90 billion share buyback (~4% of current market cap) supporting shares; 4) sticky services revenue and potential for more devices-as-a-service offerings that increase margins; and 5) launch of new product categories such as AR/VR headsets and Apple Car in 2025+ not currently reflected in current estimates/market cap.”
But this quarter from Apple is scheduled to be reported on October 27th…
“We note that FX continues to offer significant headwinds and we expect them to be worse than the 600 basis point guidance, hence our September quarter numbers are below the street. We expect FX to be partially offset better than originally expected by easing supply constraints… A more worrying metric is the year-over-year decline in App Store revenue, which fell 2% according to Sensor Tower data. Additionally, broader weakness in advertising should weigh, but other services (iCloud, AppleCare) are likely to offset the decline as we still expect year-over-year growth for services overall. We expect the focus on the Spending on services from a growing installed base, coupled with spending on iCloud, AppleCare and Apple’s own digital media assets Our estimates are below consensus, we note that buy-side expectations have largely been scaled back.”
Other Wall Street analysts also seem to be sticking with Apple stock. Several have spoken positively about Apple in recent weeks.
Evercore ISI’s Amit Daryanani: “Demand remains strong, in stark contrast to recent concerns of a slowdown. Our view remains – that while units will be stable to slightly higher, the real story here is that average selling prices will increase by a single number in the second half, which is not just for the September quarter, but likely for that as well December quarter provides upside potential.”
Piper Sandler’s Harsh Kumar: “Both 87 percent iPhone ownership and 88 percent intention to buy an iPhone are near record highs for our survey. We believe the increased penetration and intent are important given the mature market for premium smartphones. Additionally, these trends are importantly encouraging as the company continues to introduce new iPhones that could provide a significant refresh to the product cycle. We believe these positive trends can also be a catalyst for continued service growth as the Apple hardware install base continues to grow.”
Brian Soci is a freelance editor and Anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
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