Where is Apple’s stock heading after recording second-quarter earnings?
Apple’s share price reached a record high of $145 in January 2022 before falling along with the broader technology sector to hit its lowest level in March, and since then, reverted upwards, leaving it almost unchanged since the end of 2020.
The company announced strong profits in the second quarter of the fiscal year 2022, which ended on March 27, 2022, at rates that exceeded expectations. Considering that the stock price has risen by 83% in the past year, Is it time? Is it appropriate to invest in Apple shares and will the stock continue to recover to reach all-time highs in 2022?
In this article, we will talk about the company’s recent performance and what the latest forecasts of Apple stock analysts indicate about its price direction:
Electronics industry sees high demand, but chip shortage narrows supply
The technology industry and in particular the consumer electronics industry has seen strong demand in the past year with the Covid-19 pandemic that required the transformation of part of the business and education sector online, This required workers and students to purchase new devices for remote work and learning.
At the same time, A global shortage in the supply of semiconductor chips is constraining production levels for electronics including Apple’s iPad and Mac.
Achieve the SPDR Technology Sector Fund Gains amounted to 11.7% from the beginning of the year to the end of April, After falling 9.2% from an all-time high in February to its lowest level in March, The technology-led Nasdaq 100 index has also risen 10.9% since the beginning of the year. It reached an all-time high on April 26.
Apple records record revenue in the second quarter
In its financial results for the second quarter of fiscal year 2022 announced on April 28, Apple achieved record revenue of $89.6 billion, an increase of 54% over the second quarter of 2020. Net income jumped 110 percent to $23.6 billion. International sales accounted for 67% of second-quarter revenue, It grew in strong double digits in every geographic region with revenue in Europe increasing by 56%.
Apple’s installed active device base reached a new record, and iPhone revenue rose 66% year-on-year to $47.9 billion, driven by rising demand for the iPhone 12.
Revenue from services increased by 27% to reach $16.9 billion. Wearables, home appliances and accessories grew 25% compared to the same quarter last year.
Apple has sequentially added more than 40 million paid subscribers to its digital content. To reach more than 660 million subscribers via services on its platform, This was an increase of 145 million from last year and a doubling of the figure the company recorded two and a half years ago.
While the demand for digital services was strong during the pandemic, AppleCare customer support services and the company’s advertising business have been affected by store closures and reduced economic activity during the shutdowns. The company said stores began reopening in the March quarter, and advertisements began to increase as consumer confidence improved.
Apple unveils new products
On April 20, Apple announced new designs for the iMac, iPad Pro and Apple TV 4K, And it introduced a new product from AirTag, an accessory that helps track items through the Find My app.
Apple returned nearly $23 billion to shareholders during the quarter, including $3.4 billion in dividends and $19 billion through share buybacks. The company will buy back another $90 billion and raise its dividend by 7%.
The company did not provide financial guidance for the third quarter of the fiscal year due to the uncertainty surrounding the coronavirus pandemic. Although it expects revenue to grow twice as strongly compared to the same period last year, However, It expects a sharper sequential decline in revenue from the previous quarter than in previous years.
The iPhone reached a balance between supply and demand levels during the March quarter only, Due to the timing of the subsequent launch and strong demand, Supply constraints caused by semiconductor shortages and rising demand are likely to have a $3-4 billion impact on revenue over the next quarter. As the company said.
Apple’s stock price rose in after-hours trading after the earnings announcement. Where it rose from $133.58 to $136.70 per share, However, Then it declined in the next session to close at $133.48, The price has not changed much compared to the close of trading on December 31, 2020 at $132.69 per share.
What is the outlook for the stock by analysts? Are Apple shares buying or selling?
According to valuations and ratings from 37 analysts who have issued a 12-month average price target and stock price target of $142.87, This indicates that the stock has an upside potential, The lowest forecast indicated $62.50 per share, and the highest price was at $185. Only one of the analysts has a sell rating for the stock. While 27 would recommend the stock as a buy and 9 would recommend a hold.
At least 12 analysts upgraded their price targets in response to earnings reports that beat expectations, and revised forecasts ranged from $130 to $185 per share, up from $83 to $175 per share previously.
Analysts at Goldman Sachs upgraded their rating from sell to neutral after Apple reported another big win that included an increase in revenue against June’s revenue.
Not only did Apple perform better than expected on the iPhone during the course, but The Mac and iPad also outperformed bank analysts’ expectations.
While we continue to believe current levels of demand are likely to be difficult to maintain, Goldman Sachs analysts said, We equally acknowledge that privileged consumers have proven to be much more resilient during the pandemic than we had anticipated, Sachs raised his forecast for Apple stock from $83 a share to $130 a share. Morgan Stanley also raised its price target forecast to $161 from $158.
Some concerns about stock prices rose when billionaire investor Warren Buffett revealed that he sold about $7.4 billion of Apple stock in the fourth quarter of 2020. It was a good timing for the stock price, Where it was 14% higher in the fourth quarter compared to the third, That brings Buffett’s total stake to $120 billion.
