Which Big Tech company is not like the others?
Apparently it’s Apple Inc.
which is set to become the only mega-cap technology company not to see a sharp post-earnings decline in its stock price this week, after the smartphone giant delivered a somewhat mixed earnings report but seemed to reassure Wall Street just enough about the state of its demand.
The stock was up 7.6% in Friday morning trading and on track to log its largest single-day percentage gain since July 31, 2020, when it increased 10.5%, according to Dow Jones Market Data.
Apple is “the bright spot amid mega-cap carnage,” wrote Wells Fargo analyst Aaron Rakers, as Apple topped expectations with its headline results despite the backdrop of “a lot of macro/geopolitical uncertainties” as well as foreign-exchange pressures.
While Apple fell short with its iPhone sales numbers for the September quarter, Rakers noted that the company has been constrained by supply for its Pro models. At the same time, he noted that Mac revenue easily exceeded the consensus view, which supported his thesis that “Apple is solidly positioned as share taker in PCs.”
He further pointed out that Apple results were burdened by a deeper-than-expected impact from foreign exchange. But “look past the FX headwinds & you’ll see why everyone is hiding in Apple,” he said.
Rakers rates the stock at overweight with a $185 price target.
Evercore ISI’s Amit Daryanani called Apple “the last FAANG standing.”
“Overall, revenue and EPS estimates will shift higher from current levels and given the broadly disappointing EPS calls from big tech this was an impressive set of numbers and guide,” he wrote in his note to clients.
Though Apple didn’t give formal financial guidance, it offered various pieces of commentary around the December quarter, including that it could see a 10-point headwind from foreign exchange in the period and recognize a “few hundred” basis points of impact from an extra week being added to the quarter, even as Mac revenue is set for a substantial decline.
“All this results in our assessment that revenue growth will be mid-single digits (our model is at 5% vs. Street was at 2%),” Daryanani wrote.
Admittedly, it’s not just about the December quarter, he noted.
“Eventually the question will be on durability of demand beyond Dec-qtr and the impact from macro not just on iPhones but also services,” Daryanani wrote, though he likes Apple’s long-term potential to grow sales at a mid- or high-single-digit clip and grow earnings at a mid- to low-teens rate.
He rates the stock at outperform with a $190 target.
Wedbush’s Dan Ives wrote that Apple was “the one bright spot” amid “a horror show week for Big Tech earnings.”
“Given the perfect storm of currency/macro this quarter, we would characterize Apple’s results and commentary around the December quarter as net bullish around underlying demand and help throw out the noise that iPhone 14 upgrades are slowing in this cycle,” he wrote, while keeping an outperform rating but cutting his price target to $200 from $220 to reflect a lower multiple.
The latest results could help change what Citi Research analyst Jim Suva said was a relatively negative attitude towards Apple’s stock when compared to the rest of Big Tech.
“The amount of investor negativity on mega-cap tech stocks, especially Apple, is well known as recent surveys show Apple as the least favored stock amongst its peers,” he wrote. “Yes there are valid concerns of electronic retailers working down inventory and consumers having less disposable income given inflation but we believe consumers will adjust their spending allocations and continue to spend on Apple’s growing platform of products and services.”
He rates the stock a buy with a $175 price target, down from $185 before.
Barclays analyst Tim Long stayed more cautious.
“Stepping back from the print, things get tougher heading into Dec-Q and beyond and we maintain our [equal-weight] rating, mainly on headwinds sustaining current demand levels as high-end consumers potentially weaken, tougher comps on Mac, Services weakening further, regulatory overhang (App Store, Google TAC), macro impacting digital advertising as well as a rich valuation,” he wrote as he bumped his price target up by a dollar to $156.
Whether that plays out in the shares is another question.
“Near term, we expect heightened macro uncertainty to remain an overhang for the stock, although some may view AAPL as a relative safe haven in the macro storm,” Long continued.