Stand By Apple Stock Despite Supply-Chain Woes

By David Moadel, Contributor

- Apple recently served up excellent fiscal results, but not every analyst is in the bull camp.

- However, a deep dive into the data ought to quell the skeptics' concerns, even in the face of supply-chain issues.

- Investors should hold onto their Apple shares and possibly add more when the price dips.

There's no denying that Cupertino, California-headquartered Apple AAPL is a techno-gadget juggernaut. Yet AAPL stock has struggled to stay afloat lately — but that's no reason for investors to abandon ship.

It's fascinating to see certain phrases gain traction in finance media. In 2022, the term "supply chain" pops up in the headlines time and again as investors (and consumers) worry about product availability. You'll also see that phrase repeatedly in tech companies' financial reports.

That's perfectly understandable, as supply chains can profoundly affect technology companies' performance. Without a doubt, supply-chain problems have been a contributing factor in the underperformance of AAPL stock this year.

Still, it's an encouraging sign that Apple can continue to deliver strong fiscal results despite supply-chain challenges. Wall Street's analysts don't all agree on the outlook for Apple, but we can let the data be our guide. In the final analysis, Apple's overall fiscal picture looks largely positive.

What's Happening with AAPL Stock?

With a broad-base rout of tech stocks underway, it's unreasonable to blame Apple’s management or business model alone for the decline in its share price. Still, it can be uncomfortable to watch AAPL stock flail around like a fish out of water.

Nevertheless the stock has held its ground fairly well and the downturn has provided market participants with a nice opportunity. Indeed, Apple's trailing 12 month price-to-earnings ratio of 25.34 indicates a very reasonable valuation.

Unfortunately, Apple's Q2 earnings weren't the positive catalyst that the bulls were undoubtedly hoping for. As AAPL stock flops wildly, investors might be led to believe that Q2 was a bad quarter for Apple.

But let’s see what the data actually tells us. As it turns out, Apple served up record Q2 revenue of $97.3 billion in 2022, a 9% year-over-year improvement.

Turning to the bottom line, Apple posted Q2 2022 earnings-per-share (diluted) of $1.52, easily beating the same period in the prior year's $1.40. That's an especially impressive feat given this year's supply-chain constraints.

Apple CEO Tim Cook proudly announced that the, “record results are a testament to Apple’s relentless focus on innovation and our ability to create the best products and services in the world.” He might be slightly overstating the significance of Apple's quarterly results, but the data was fairly decent overall.

He Said, She Said

Apple's results were just fine, but some Wall Street experts are difficult to please. Thus, Rosenblatt analyst Barton Crockett recently lowered his price target on AAPL stock from $184 to $168.

Rosenblatt also assigned a "neutral" rating to the stock (no ringing endorsement), citing expectations of larger supply-chain disruptions in the June quarter, but still called Apple's Q2 report "constructive."

In contrast, Morgan Stanley analyst Katy Huberty reiterated her "overweight" rating on AAPL stock while assigning it a price target of $195. Evidently taking a glass-half-full approach, Huberty observed positive App Store revenue trends in China, Japan and South Korea.

“The improved positioning in these regions more than offset weaker growth in the US,” she assured. Moreover, Huberty has a positive outlook for Apple's June quarter in this segment, modeling 15% year-over-year App Store revenue growth to $7.2 billion.

What Investors Should Do Now

Analysts are never going to see eye to eye on Apple's future and that's perfectly fine. The experts can agree to disagree, and informed investors can make their own decisions.

Concerning Apple, the fiscal stats support an overall bullish stance. Apple's reasonably low P/E ratio also suggests there's good value here.

At the end of the day, you can align your AAPL stock investment strategy with Rosenblatt's $168 price target, or with Huberty's price objective of $195. Or better yet, consider Apple's impressive performance despite the supply-chain woes, and just hold your shares for the long term.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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Posted In: FintechMarketsTechApplecontributorsQ2Supply-chain
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