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Apple Can’t Lift the Market by Itself

  • Apple (AAPL) stock has been moving in line with the NASDAQ average, down 21% in 2022.
  • Apple has worries, but no profit problems so far.
  • Apple remains a safe haven in the stock market storm.

Apple Can’t Lift the Market by ItselfSource: WeDesing / Shutterstock.com

Apple (NASDAQ:AAPL) remains the NASDAQ bellweather.

That’s not a good thing to be in 2022. AAPL stock is down 21% while the NASDAQ is down 28%.

With a market cap of $2.3 trillion, it would hard for Apple to be much better than average. The company is still growing, but at just 9% in its latest quarterly report. Net income was up just 10% at $25 billion, $1.54/share. 

Investors, however, have become a tough crowd. As earnings multiples have fallen, so has Apple stock. It was expected to trade May 24 at about $141/share, just 23.3 times last year’s earnings. The once-generous dividend of 92 cents/share now yields just 0.64%, about the same as your savings account.

AAPL
Apple Inc.
$140.36

The DeGlobalization Era

The main worry around Apple is that the world is no longer flat. 

The Covid-19 pandemic, the war in Ukraine, and China’s ambitions have caused a great turning-inward around the world. People worry about the security of global supply chains. Even Apple wants to be less dependent on China. It’s looking to do what Nike (NYSE:NKE) did years ago, open factories in Vietnam, maybe even India.

Apple said last year it would invest $430 billion over five years in the U.S., in addition to supporting Taiwan Semiconductor (NYSE:TSM) in its effort to “in-shore” production of Apple chips.  Most of the jobs involve data centers, software and Apple TV production.

China remains a key market for Apple, with 20% of its revenue. But Chinese domestic products and Apple’s own high prices mean it’s no longer the top-selling phone there.

Apple TV Matters

Like all great American brands, such as Starbucks (NASDAQ:SBUX), Coca-Cola (NYSE:KO), Walt Disney (NYSE:DIS) and Nike, Apple is obsessed with its image.

Apple TV is part of that image. Apple has focused on cutting-edge quality in its TV offerings, with shows like Ted Lasso, Severance and Slow Horses. It’s part of a services business that earned $14.3 billion last quarter, on revenue of $19.8 billion. That’s still half what it made with products, but it’s growing faster and hugely profitable. Apple could goose those results by buying a streaming outfit like Paramount Global (NASDAQ:PARA) or Warner Brothers Discovery (NASDAQ:WBD), but for now it’s intent on going it alone to maintain those high margins.

Apple’s service margins and continuing product growth have analysts like Dan Ives continuing to pound the table for the stock. A P/E of 23 isn’t excessive if earnings growth is solid, they argue. Earnings per share for the first half of Apple’s 2022 fiscal year doubled the numbers from fiscal 2021.

But size matters, say the bears. Apple represents almost 10% of the NASDAQ’s $24.15 trillion market cap. When Apple stock sneezes, the NASDAQ catches a cold. The law of big numbers makes it hard to see above-market growth when annual revenue is approaching $400 billion.

The Bottom Line on AAPL Stock

There is no stock that is safer to own right now than Apple.

This doesn’t guarantee you a profitable 2022. If the Ukraine war drags on, if China doesn’t turn around, Apple will have trouble just like every other company. But it’s also likely to rise in the face of any good news.

That’s why I continue to own Apple stock, and that’s why you should too. Trade wars, real wars and bear markets all end. I can’t tell you how, and I can’t tell you when. When they do, the market’s leaders will rise first. That’s what Apple is, the market’s leader.

There will come a time when the Apple era ends, as the eras of General Electric (NYSE:GE), Exxon Mobil (NYSE:XOM) and General Motors (NYSE:GM) ended. When computer technology no longer drives global growth, it will be time to leave. That time is not yet in sight.

On the date of publication, Dana Blankenhorn held long positions in TSM and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

More From InvestorPlace

The post Apple Can’t Lift the Market by Itself appeared first on InvestorPlace.

  • Apple (AAPL) stock has been moving in line with the NASDAQ average, down 21% in 2022.
  • Apple has worries, but no profit problems so far.
  • Apple remains a safe haven in the stock market storm.

Source: WeDesing / Shutterstock.com

Apple (NASDAQ:AAPL) remains the NASDAQ bellweather.

That’s not a good thing to be in 2022. AAPL stock is down 21% while the NASDAQ is down 28%.

Advertisement

With a market cap of $2.3 trillion, it would hard for Apple to be much better than average. The company is still growing, but at just 9% in its latest quarterly report. Net income was up just 10% at $25 billion, $1.54/share. 

Investors, however, have become a tough crowd. As earnings multiples have fallen, so has Apple stock. It was expected to trade May 24 at about $141/share, just 23.3 times last year’s earnings. The once-generous dividend of 92 cents/share now yields just 0.64%, about the same as your savings account.

Advertisement

AAPL
Apple Inc.
$140.36

The DeGlobalization Era

Advertisement

The main worry around Apple is that the world is no longer flat. 

The Covid-19 pandemic, the war in Ukraine, and China’s ambitions have caused a great turning-inward around the world. People worry about the security of global supply chains. Even Apple wants to be less dependent on China. It’s looking to do what Nike (NYSE:NKE) did years ago, open factories in Vietnam, maybe even India.

Advertisement

Apple said last year it would invest $430 billion over five years in the U.S., in addition to supporting Taiwan Semiconductor (NYSE:TSM) in its effort to “in-shore” production of Apple chips.  Most of the jobs involve data centers, software and Apple TV production.

China remains a key market for Apple, with 20% of its revenue. But Chinese domestic products and Apple’s own high prices mean it’s no longer the top-selling phone there.

Advertisement

Apple TV Matters

Like all great American brands, such as Starbucks (NASDAQ:SBUX), Coca-Cola (NYSE:KO), Walt Disney (NYSE:DIS) and Nike, Apple is obsessed with its image.

Apple TV is part of that image. Apple has focused on cutting-edge quality in its TV offerings, with shows like Ted Lasso, Severance and Slow Horses. It’s part of a services business that earned $14.3 billion last quarter, on revenue of $19.8 billion. That’s still half what it made with products, but it’s growing faster and hugely profitable. Apple could goose those results by buying a streaming outfit like Paramount Global (NASDAQ:PARA) or Warner Brothers Discovery (NASDAQ:WBD), but for now it’s intent on going it alone to maintain those high margins.

Advertisement

Apple’s service margins and continuing product growth have analysts like Dan Ives continuing to pound the table for the stock. A P/E of 23 isn’t excessive if earnings growth is solid, they argue. Earnings per share for the first half of Apple’s 2022 fiscal year doubled the numbers from fiscal 2021.

Advertisement

But size matters, say the bears. Apple represents almost 10% of the NASDAQ’s $24.15 trillion market cap. When Apple stock sneezes, the NASDAQ catches a cold. The law of big numbers makes it hard to see above-market growth when annual revenue is approaching $400 billion.

The Bottom Line on AAPL Stock

There is no stock that is safer to own right now than Apple.

Advertisement

This doesn’t guarantee you a profitable 2022. If the Ukraine war drags on, if China doesn’t turn around, Apple will have trouble just like every other company. But it’s also likely to rise in the face of any good news.

That’s why I continue to own Apple stock, and that’s why you should too. Trade wars, real wars and bear markets all end. I can’t tell you how, and I can’t tell you when. When they do, the market’s leaders will rise first. That’s what Apple is, the market’s leader.

Advertisement

There will come a time when the Apple era ends, as the eras of General Electric (NYSE:GE), Exxon Mobil (NYSE:XOM) and General Motors (NYSE:GM) ended. When computer technology no longer drives global growth, it will be time to leave. That time is not yet in sight.

On the date of publication, Dana Blankenhorn held long positions in TSM and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Advertisement

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The post Apple Can’t Lift the Market by Itself appeared first on InvestorPlace.

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