A Resilient Surge Amid Headwinds
Apple (AAPL) stock weathered a stormy close to 2023 and tempestuous start to 2024, as analysts raced to outdo each other in predicting its demise. Yet, defying all prognostications, equities have surged by approximately 8% since the caliginous onset of January 5. As February 1, the release date for Q1 FY24 earnings, draws nigh, Apple’s stock ascends toward the pinnacles it reached mid-December, boosted by a flurry of bullish forecast adjustments that have crowned AAPL with a Zacks Rank #1 (Strong Buy).
Apple, the quintessential Wall Street leviathan, has soared far beyond its firmament as an iPhone manufacturer, metamorphosing into a multifaceted titan. Inexplicably, AAPL trades above all its pivotal short-term and long-term moving averages.
The Whims of Negativity
A cabal of prominent analysts has recently downgraded Apple, fretting about slackening iPhone sales, especially in the vast Chinese market. Their trepidations compound broader anxieties over a pall of saturation that looms over the high-end smartphone sphere. In a further twist, legal wrangles concerning the App Store – an insignificant fleabite – have stoked their embers of concern. This fretful scenario is compounded by the mounting specter of competition, none more potent than the force Huawei Technologies exerts in the world’s second-largest economy. AAPL, in litany with conglomerates from various industries, suffers as the behemoth of China grapples with a sluggish economy, mired in geopolitical crosscurrents.
Despite these afflictions, AAPL’s sales have ebbed year over year for the past four quarters, culminating in a 2.8% decrease in total FY23 revenue, its third annal decline in eight years.
The iPhone Enigma
Apple’s aegis remains unassailable, and its cycles of novel phones and devices have forged an uncanny bond with consumers who clamor for each fresh morsel churned from Cupertino. Consumers seamlessly transition to the nascent iPhones and other gadgets, in willed denial of any game-changing differences, obstinately – they refuse to extricate themselves from Apple’s gravitational orbit. The behemoth peddled $200 billion of iPhones in FY23, a staggering ascent from $142 billion in FY19. AAPL’s enduring growth narrative writes itself in a world ensnared in the insatiable lure of smartphones, a narrative further embellished by subscriptions nesting within its flagship services unit.
CEO Tim Cook has astutely steered Apple beyond being an iPhone monolith, transforming it into a veritable compendium that perennially entices its burgeoning customer base. Apple’s services segment plundered a 9% increase in FY23 – constituting 22% of its revenue, a purlieu eclipsing the iPhone by a distance.
The Dawn Ahead
Taiwan Semiconductor Manufacturing Company’s (TSM) recent buoyant results and bullish guidance presage a resurgence in the ostensibly beleaguered smartphone market. Apple’s FY24 revenues surge by a projected 3% and are anticipated to vault further by 6% in FY25, culminating in a $418.36 billion crescendo, an ascension from $383.29 billion in FY23.
Simultaneously, adjusted earnings are projected to burgeon by 8% in FY24 and 9% in FY25, a staggering leap from last year’s stagnation.
Apple’s earnings have surpassed all forecasts, with the isolated exception of a meager dereliction in the first quarter of FY23.
Performance, Technical Levels & Valuation
Analysing Apple Inc.’s Resurgence in Stock Performance
Apple’s Stock Performance
Let’s delve into the world of the big apple. The numbers tell a compelling story no doubt. Since January 5th, APPL has seen a staggering 8% surge in its stock, trading beneath the average Zacks price target by 6% and resting comfortably around 2% below its mid-December records. The surge has resonated, taking Apple back above its 50-day as well as the 21-day moving averages. Moreover, the resurgence from oversold RSI levels to above neutral is a sign of revitalization.
The Apple-Microsoft Contrast
Comparing Apple to Microsoft (MSFT), the former’s shares have shot up by an astounding 1,000% over the last decade. This elevation surpasses Microsoft and leaves the Zacks Tech sector’s 275% run in the dust. However, in the recent three-year span, Apple has only seen a 36% surge, unlike Microsoft’s 75%. Such contrasting statistics illustrate the intricate nature of the stock market.
Apple’s Underperformance and Current Standing
While Apple has underperformed the Tech industry over the last 12 months, this actually indicates that it may be less overheated than commonly perceived. It stands strong, trading above its very long-term 21-month moving average and appears relaxed by historical RSI standards. In terms of valuation, Apple is currently at a 20% discount to its five-year highs at 28.8X forward 12-month earnings, not too far above its median or the Tech sector. These robust figures demonstrate stability and strong standing in the market.
Apple’s Position and Future Growth
Apple has reinstated hope through a strong return of $25 billion to its shareholders last quarter via buybacks and dividends. It has not shied away from commitment to future growth, heavily investing in areas such as artificial intelligence and electric vehicles. This besieges the notion that Apple is far from its former glory.
Despite the uncertainties that lay ahead, Apple has proven once again its ability to adapt, evolve, and thrive. It serves as an embodiment of perseverance against the evanescence of tech empires. The question remains, will the potential of the next Apple outshine the tried and tested success of the existing giant? Only time will tell. But for now, the big apple appears to be regaining its crunch.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
