Apple earnings met with relief as AAPL stock rallies, but is the bad news just pushed out one quarter?
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UNLOCK OFFER- Apple earnings beat on top and bottom lines.
- AAPL stock rallies afterhours trading by nearly 4%.
- AAPL share price also boosted by the doveish Fed.
Apple (AAPL) released earnings after the close on Thursday, and they lived up to hopes for a continued equity market rally. Earlier this week the Fed pivot had unleashed a furious equity rally, and we said yesterday in our preview piece that we needed both Apple and Amazon to deliver to keep this rally going. Well, both mega-tech names lived up to the billing, and now the rally looks set to continue.
Also read: Apple Stock Deep Dive: AAPL price target at $100 on falling 2023 revenues
Apple stock news
Apple released after Thursday's close earnings that beat the street. Earnings per share (EPS) saw Apple earn $1.20 per share, while the street estimate sat lower at $1.15. Revenue was also ahead, hitting $82.96 billion versus the consensus of $82.81 billion. This was welcome news, and it was bullish commentary afterward that helped to push AAPL stock higher. This also given Apple's size pushed equity index futures higher. In particular Apple CEO Tim Cook said supply constraints were not as big an issue as previously feared and iPhone demand was looking strong. iPhone sales continued to gain in the quarter. Luca Maestri Apple's CFO said he expects revenue to grow year on year and margins to be 42% at the mid-point of guidance.
But we need to point out a few caveats to this optimism. Firstly revenue growth is slowing and looks like it will continue to do so. Revenue growth is running at 2% yearly which is the lowest growth since 2020.
Apple revenues were up 2% over the last year, the slowest YoY growth rate since Q3 2020. $AAPL pic.twitter.com/lRnNjqJ1F3
— Charlie Bilello (@charliebilello) July 28, 2022
Apple revenues were up 2% over the last year, the slowest YoY growth rate since Q3 2020. $AAPL pic.twitter.com/lRnNjqJ1F3
— Charlie Bilello (@charliebilello) July 28, 2022
We also need to point out that comments from Luca Maestri around margins are also lower than previous estimates moving from over 43% to now 42% at the midpoint. This would bring consensus EPS estimates down to near $6.30 from the current $6.51. That would give a price target in the region of $120 based on current assumptions for a falling P/E ratio. We base this one previous history on falling P/E ratios during a bear market and a recession. We are now in both!
In our deep dive, we had a price target of $100 for the next 12-month period which we now upgraded to $110 based on strong earnings but we still have concerns over margin compression which has now all but been confirmed by Apple. We also see revenue decreasing but were surprised it held up so well this quarter. However the trend of lower consumption across consumer spending has been alluded to by retailers, Walmart, Target, Best Buy, etc so we cannot see how even Apple can avoid this unless Chine engages in massive fiscal easing to pump China's consumer demand.
Apple (AAPL) stock forecast
While our 12-month price target is noticeably bearish we have been calling for this bear market rally to extend and see further upside for Apple stock. The 200-day moving average is likely to be the first hurdle cleared on Friday and that opens the path for an AAPL stock move to test $171.40 resistance. That is where things will need to be reassessed.
AAPL 1-day chart
- Apple earnings beat on top and bottom lines.
- AAPL stock rallies afterhours trading by nearly 4%.
- AAPL share price also boosted by the doveish Fed.
Apple (AAPL) released earnings after the close on Thursday, and they lived up to hopes for a continued equity market rally. Earlier this week the Fed pivot had unleashed a furious equity rally, and we said yesterday in our preview piece that we needed both Apple and Amazon to deliver to keep this rally going. Well, both mega-tech names lived up to the billing, and now the rally looks set to continue.
Also read: Apple Stock Deep Dive: AAPL price target at $100 on falling 2023 revenues
Apple stock news
Apple released after Thursday's close earnings that beat the street. Earnings per share (EPS) saw Apple earn $1.20 per share, while the street estimate sat lower at $1.15. Revenue was also ahead, hitting $82.96 billion versus the consensus of $82.81 billion. This was welcome news, and it was bullish commentary afterward that helped to push AAPL stock higher. This also given Apple's size pushed equity index futures higher. In particular Apple CEO Tim Cook said supply constraints were not as big an issue as previously feared and iPhone demand was looking strong. iPhone sales continued to gain in the quarter. Luca Maestri Apple's CFO said he expects revenue to grow year on year and margins to be 42% at the mid-point of guidance.
But we need to point out a few caveats to this optimism. Firstly revenue growth is slowing and looks like it will continue to do so. Revenue growth is running at 2% yearly which is the lowest growth since 2020.
Apple revenues were up 2% over the last year, the slowest YoY growth rate since Q3 2020. $AAPL pic.twitter.com/lRnNjqJ1F3
— Charlie Bilello (@charliebilello) July 28, 2022
Apple revenues were up 2% over the last year, the slowest YoY growth rate since Q3 2020. $AAPL pic.twitter.com/lRnNjqJ1F3
— Charlie Bilello (@charliebilello) July 28, 2022
We also need to point out that comments from Luca Maestri around margins are also lower than previous estimates moving from over 43% to now 42% at the midpoint. This would bring consensus EPS estimates down to near $6.30 from the current $6.51. That would give a price target in the region of $120 based on current assumptions for a falling P/E ratio. We base this one previous history on falling P/E ratios during a bear market and a recession. We are now in both!
In our deep dive, we had a price target of $100 for the next 12-month period which we now upgraded to $110 based on strong earnings but we still have concerns over margin compression which has now all but been confirmed by Apple. We also see revenue decreasing but were surprised it held up so well this quarter. However the trend of lower consumption across consumer spending has been alluded to by retailers, Walmart, Target, Best Buy, etc so we cannot see how even Apple can avoid this unless Chine engages in massive fiscal easing to pump China's consumer demand.
Apple (AAPL) stock forecast
While our 12-month price target is noticeably bearish we have been calling for this bear market rally to extend and see further upside for Apple stock. The 200-day moving average is likely to be the first hurdle cleared on Friday and that opens the path for an AAPL stock move to test $171.40 resistance. That is where things will need to be reassessed.
AAPL 1-day chart
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