Apple shares may gain steam with iPhone 14 launch, analysts say

Apple stock had a rough year. Stocks are down more than 10% so far in 2022, and Apple is trading about 15% below the all-time high it hit in early January.

But with the new iPhones set to be unveiled on Wednesday, expectations of strong year-end sales — and all the subscription revenue that comes with that — will be enough to turn Apple stock from red to green. ?

Apple has had some recent momentum. Stocks have risen more than 7% in the last three months. It’s also worth noting that Apple isn’t doing as poorly as the broader market and the rest of Big Tech’s stock.

Investors are finding comfort in Apple’s steady earnings growth and strong balance sheet, even in these tumultuous times.

The S&P 500, for example, is down nearly 18% this year, while Facebook owner Meta Platforms, Amazon, Netflix and Google parent Alphabet have all been particularly hard hit. Amazon and Alphabet are down nearly 25% in 2022, while Meta and Netflix are down over 50%.

Investors appear to be betting that the newest batch of iPhones will lead to solid jumps in Apple’s earnings.

Analysts are predicting earnings per share increases of nearly 9% for this fiscal year and around 6% for 2023, respectable returns for a company as big as Apple.

The tech giant is expected to generate $392.5 billion in sales this year and Apple is the most valuable company in the world with a market capitalization of $2.5 trillion.

The company generates a huge amount of money with a new line of iPhones as existing customers upgrade and some resistant ones make the switch from Android devices.

Apple also makes a lot of money from its lucrative service unit, subscriptions to iCloud, Apple Music, Apple TV+ and other perks for iPhone, iPad and Mac users.

“All the fuss around the iPhone 14 update cycle should help Apple in the short term,” said Jordan Kahn, chief investment officer at ACM Funds. Kahn owns Apple in the ACM Dynamic Opportunity Fund.

One analyst thinks that more iPhone users than usual will be looking to get a new device after this launch. This is because many customers seem to have kept iPhones longer before getting updates.

The launch of new devices may lead these users to finally upgrade.

Wedbush Securities analyst Daniel Ives noted in a report that Apple’s initial order for 90 million iPhone 14 units is largely unchanged compared to what it had ordered for the iPhone 13, even with “macro storm clouds set in.” forming”.

So Apple clearly still expects its devices to sell even as consumer spending slows more broadly.

“This speaks to the underlying demand story that Apple anticipates for this upcoming iPhone release, with our estimates that 240 million of the 1 billion iPhone users worldwide have not updated their phones in over 3.5 years.” , added Ives.

Apple also benefits from the fact that it is a stock that is loved not only by individual investors but also by the giants of Wall Street.

According to a survey of market strategists at Goldman Sachs, Apple was a top choice for mutual funds and hedge funds at the end of the second quarter, along with other mega-capital tech companies including Amazon, Nvidia and Tesla.

Apple is that rare animal, a stock that is still exciting enough for the growing crowd, but is also attractive to value investors thanks to its reasonable price, penchant for share buybacks to boost earnings, and a steadily growing dividend. .