Some people are asking whether Apple (NASDAQ:AAPL) stock is back.
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Well, I guess you could argue that Apple really never went anywhere.
Apple stock is up 24% over the last year despite the ravaging tech stocks suffered over the last few weeks.
Tech stocks have taken a beating as of late as investors flee for safe havens amid inflation fears. The Fed is expected to raise interest rates in March, making growth names less appealing.
AAPL stock took a 10% hit in late January when it issued its fiscal Q1 2022 earnings.
Since then, things have certainly changed. AAPL stock is rose 9% on the heels of that mammoth earnings report and still has held on to more than 5% of those gains. It trades today at about $173.
What Made Apple’s Earnings Report So Good?
The company announced its revenue jumped 11% to set a new all-time record. Revenue was $123.9 billion, versus analyst expectations of $118.66 billion.
Earnings per share were also up by 25% on a year-over-year basis, coming in at $2.10 per share. Analysts had expected $1.89 per share.
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In nearly every category, Apple outperformed expectations:
- Revenue for iPhones, powered by the company’s iPhone 13, hit $71.63 billion versus estimates of $68.34 billion.
- Revenue for Apple services, such as the App store and Apple TV+, reached $19.52 billion versus estimates of $18.61 billion.
- Other products revenue was $14.7 billion versus estimates of $14.59 billion.
- Revenue from Macs came in at $10.85 billion versus estimates of $9.52 billion.
In fact, the only category that was a disappointment was iPads, which saw revenue of $7.25 billion versus estimates of $8.18 billion.
Even that iPad “disappointment” wasn’t too bad. After all, can you imagine all the companies in the world that would be thrilled with $7.25 billion in annual revenues?
I’m not going to feel bad that Apple pulled in only $7.25 billion in a quarter with a secondary product line.
So iPads aside, all of these numbers were great. But what made investors really excited were the words of CEO Tim Cook in an interview with CNBC.
“What we expect for the March quarter is solid year-over-year revenue growth,” he said. “And we expect supply constraints in the March quarter to be less than they were in the December quarter.”
Apple also announced it returned nearly $27 billion to shareholders in the quarter, and it declared a dividend of 22 cents per share that was paid Feb. 10.
According to InvestorPlace’s Louis Navellier, Apple is expected to announce a third-generation iPhone SE this spring. The iPhone SE has already been a huge success for Apple. But the third-generation version could be a big deal, Navellier says:
This may well be the most important iPhone SE launch to date, because the new model will feature 5G. While it has not been without controversy, 5G has turned into a must-have feature for smartphones. It’s the kind of upgrade that convinces even long-time holdouts to buy a new phone.
Navellier writes that there are as many as 1.7 billion older iPhones and Android devices in users’ hands these days. Considering that AAPL made huge profits over the holidays by selling 40 million iPhone 13s and iPhone 13 Pros, the opportunity is enticing.
Apple has not issued guidance for the quarter. Speaking to analysts, Cook cautioned that revenue growth in the March quarter would be less than it was a year ago.
But that’s only because it was a year ago when Apple released its new iPhone line in the March quarter instead of the December quarter as it typically does.
That means its Q2 2021 revenue was up 54% — and there’s no way that AAPL will go up another 54% in Q2 2022.
The Bottom Line on AAPL Stock
I’m as impressed by anyone about Apple’s record-setting quarter, but the most important thing to know about AAPL stock right now is that the company’s supply chain issues are waning.
That will make it easier for Apple to move make its products into the hands of eager buyers.
Apple stock is still pretty attractively priced, with a trailing price-sales ratio of only 28. The average price target of AAPL stock is $191.82, which represents a healthy upside.
Personally, I think that’s a pretty conservative estimate, but understandable considering inflationary pressures coming down the pike this spring.
All in all, Apple remains a core stock to have in any long-term investor’s portfolio.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.
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