It is looking uglier by the day. With mounting fears over lingering inflation, rising interest rates that don’t seem to find a ceiling, and deterioration in global economic activity, Apple (AAPL) – Get Apple Inc. Report stock has reached 24% lower for the year alongside an equally soft S&P 500 (SPY) – Get S&P 500 ETF TRUST ETF Report.
However, even ahead of a nail-biting CPI report scheduled for this Thursday and the upcoming calendar Q3 earnings season for tech companies, a couple of analysts have been emphatic: there isn’t too much about AAPL that should worry investors now.
Below are the arguments recently made by Citi’s Jim Suva and Key Banc’s Brandon Nispel, two analysts that see Apple stock rising to $185 per share, for 34% upside opportunity.
Figure 1: Apple Stock: Fears Are Overdone, Say These Analysts
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(Read more from Apple Maven: Will Apple Follow Meta And Launch A Mixed Reality Device?)
Apple: delivering the goods
Mr. Suva’s leaned on “the full package” that Apple has been this year to explain why he is not concerned about the Cupertino company ahead of earnings season.
According to him, Apple has hit the nail on the head with the recent iPhone 14 launch. The analyst was particularly optimistic about consumer preference towards the Pro models, which carry a higher price tag – and likely better margins.
That said, the Citi researcher did not have a particularly differentiated view on the number of iPhone units that he expects Apple to ship in the second half: 90 million. This is a sales figure that other analysts on Wall Street have also projected, and something that would not be substantially better compared to the iPhone 13 last year.
Mr. Nispel, on the other hand, looked at Apple’s performance from the top down. He started off by noting that big-ticket purchases by US consumers in September exceeded what the historical month-over-month trend would have suggested.
Based on the analyst’s report, spending increased by 11% from August. This is good news, considering that seasonality tends to be negative heading into the last month of the quarter, according to the researcher.
These observations bode well for Apple’s hardware sales in the company’s fiscal Q4. KeyBanc sees the number climbing 11% sequentially, roughly three percentage points above consensus.
But what about AAPL stock?
None of the above should be bad news for Apple stock and its investors – the contrary, if anything. Considering the uncertainty about economic activity and consumers’ spending power heading into the end of 2022, Apple may continue to execute better than most of its peers.
I wonder, however, how much the company’s financial performance might matter to Apple shares in the near term. I have recently argued that macroeconomic factors, and not the performance of the iPhone 14 or any other of Apple’s products and services, will likely dictate the direction of AAPL in the foreseeable future.
Therefore, I continue to expect high levels of volatility in AAPL over the next weeks, maybe even a retesting of the 2022 lows. Inflation and the conversations around monetary policy will be the most important variables to keep an eye on, in my opinion.
That is not to say, however, that the data points presented by the two Wall Street analysts are meaningless. Should Apple continue to deliver the goods, as it has in the past few years, the company’s stock could eventually leap ahead of the S&P 500 again.
Witnessing and benefitting from this potential outperformance, however, will require some patience from investors.
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