Apple posted its first sales drop since 2019, but analysts say the tech titan's stock is still set to climb nearly 30% over the next year
- Apple's latest earnings and revenue fell short of expectations, but that shouldn't discourage investors.
- But Wedbush and Jefferies said investors should still see the tech heavyweight's stock as a buy.
Apple missed estimates for its fiscal first-quarter earnings and sales, but two analysts said the tech heavyweight should still be on investors' buy list.
Apple late Thursday turned in its first yearly sales decline since 2019. Sales fell 5% to $117.1 billion with iPhone and Mac revenue below expectations. Apple had "to navigate a challenging environment," said CEO Tim Cook.
The stock was up about 1% as Friday trading got underway, but it had been down as much as 2.7% during premarket trade.
Apple's guidance for March was conservative but mostly driven by currency and supply-chain considerations rather than major demand softness which had been worrying Wall Street ahead of the results, Wedbush Securities analyst Dan Ives in a note to clients Friday.
"In a nutshell, we would be buyers of this unique tech stalwart and believe Cupertino is a Rock of Gibraltar tech stock in a stormy macro," he said. Demand in the Chinese market into 2023 and potential for gross margin expansion supported Wedbush's decision to raise its Apple price target to $180 from $175 and maintain its outperform rating.
A price of $180 implies an upside of 19% from Thursday's closing price of $150.82.
"We also note that Apple now has an installed base of 2 billion devices with roughly 1.2 billion iPhones worldwide. These are both up double digits year over year and speaks to a strengthening and growing customer base with iPhone share gains in China front and center," Ives said.
"We're keeping our Buy rating and $195 PT, and see any weakness in the stock as a more appealing buying opportunity," Jefferies analyst Kyle McNealy wrote to clients on Friday. The price target implies 29% upside for the stock.
He said Apple offered "guiderails for modelling" in the coming quarter and that its March revenue growth view is below the $96.9 billion consensus estimate.
There's "now a bigger dose of macro pressure built into the guidance," McNealy said.
The Jefferies analyst said it expected to see iPhone units coming in below Street expectations but higher average selling prices helps and carries forward into the March quarter. Manufacturing output normalizing is also among the catalysts for the stock. Jefferies did lower its fiscal year 2023 and 2024 earnings and revenue projections.
Apple's quarterly sales of $117.1 billion were under the Bloomberg estimate of $121.1 billion, and adjusted per-share earnings of $1.88 missed the $1.94 consensus estimate.
iPhone revenue of $65.7 billion was under the Street's estimate of $68.3 billion, and Mac revenue of $7.7 billion fell short of the $9.72 billion estimate.
Apple stock during 2023 had picked up about 16% ahead of the earnings report. In 2022, they lost roughly 27% in part as mega-cap tech stocks were beaten down as the Federal Reserve swiftly raised up borrowing rates.