Apple (AAPL) stock popped after better-than-expected iPhone sales helped it beat Wall Street's quarterly profit and sales estimates – and analysts say shares in the mega-cap tech giant are just getting started.
Apple stock jumped more than 5% at one point in early Friday trading thanks to upbeat fiscal second-quarter results released the previous evening. As a company with a market capitalization of more than $2.6 trillion at the beginning of the session, a 5% increase in Apple's stock price adds more than $130 billion in value to one of analysts' top Dow stocks.
For the three months ended April 1, Cupertino, California-based Apple reported earnings of $1.52 a share, easily topping analysts' forecast for earnings per share (EPS) of $1.43, according to S&P Global Markets Intelligence. Revenue declined 3% to $94.8 billion, vs the Street's estimate for revenue of $92.8 billion.
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"We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high," Apple CEO Tim Cook said in a press release.
The global smartphone market suffered a 15% decline in shipments during the first three months of 2023, according to market researcher IDC, and Apple was expected to go along for the ride. But unexpected strength in iPhone sales – quarterly segment revenue increased 2% year-over-year – helped Apple exceed the Street's expectations.
Also boosting Apple stock were additional efforts to return more cash to shareholders. Apple upped its dividend by 4% to 24 cents per share quarterly. Furthermore, Apple's board of directors authorized an additional program to buy back up to $90 billion of AAPL stock.
Apple stock: Buy, Hold or Sell?
Apple stock has rallied an almost incomprehensible 33% for the year-to-date, adding roughly $680 billion in market value. To put that in perspective, including Apple, only five companies in the S&P 500 have market caps of more than $680 billion.
And yet the Street says shares have plenty of upside left. Of the 45 analysts issuing opinions on Apple stock surveyed by S&P Global Market Intelligence, 25 rate it at Strong Buy, nine say Buy, nine call it a Hold, one says Sell and one rates it at Strong Sell. That works out to a consensus recommendation of Buy, with high conviction.
We'll let Oppenheimer analyst Martin Yang sum up the bullish investment thesis for Apple stock: "We expect Apple's defensive moats to strengthen under the challenging macro backdrop, resulting in long-term, sustainable share gains in hardware and services."
Yang rates AAPL at Outperform (the equivalent of Buy), and raised his price target to $195 from $170. The new price target gives Apple stock implied price upside of 13% in the next 12 months or so.
For context, the Street's highest price target of $210 gives Apple stock implied upside of 20%. At the other end of the range, Apple stock would have to fall 33% from current levels to hit the Street's lowest price target, which stands at $116.
True, Apple beat a pretty low bar for estimates. But it did so resoundingly, and very much relied on the "sticky" ecosystem of products and services that no less an investing luminary than Warren Buffett praises.
Don't forget: the chairman and CEO of Berkshire Hathaway (BRK.B) calls Apple his "third business." That's why Apple is the Oracle of Omaha's top stock pick, accounting for nearly 40% of the Berkshire Hathaway stock portfolio.
As one of the best stocks of the past 30 years – and a name that has generated stupendous wealth for anyone who bought Apple stock 20 years ago – it certainly is hard to bet against Apple.
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