Apple Still Appears a Low-Hanging Fruit for Hungry Investors

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As the market undergoes sustained selling pressure, dragging down quality stocks, Apple (AAPL) is still a go-to stock.

Last week, Apple reported stellar second-quarter earnings, dampened by cautious guidance related to production-related challenges. The 8.5% reported revenue growth would sharply decelerate in the third quarter, perhaps leading to a decline in earnings per share year of year. Market weakness and shorter-term headwinds, however, create a buying opportunity for Apple shares.

To some effect, every negative current market and economic concern potentially hurts Apple — higher interest rates compressing growth tech multiples, supply chain challenges, chip shortages, a Fed-induced recession, slowing consumer spending, and China lockdowns. On the other hand, relief on any of these fronts will benefit Apple. The recent Q2 earnings, however, demonstrate the company’s ability to weather many of the prevailing challenges.

Apple guided to a $4 billion to $8 billion supply chain effect that will limit revenues. Notably, demand remains intact. Due to the uncertain extent of the disruptions, in recent years Apple’s guidance has been overly conservative, leading to large estimate beats. So, investors will be keen to reward Apple shares upon any supply chain relief, especially related to China’s Covid lockdowns.

Apple’s stock multiple has compressed from a high of 30 down to the 25s. While not cheap, the investment case is still intact. The company continues to invest heavily in research and development (over 6% of revenue), continues to expand into new industries such as auto, health, augmented reality and virtual reality, and to pursue additional service offerings. Steady buybacks keep reducing shares outstanding, averaging about 2 million shares per day. The 5G cycle, with wireless telecom competitors promoting iPhone upgrade deals, is still the driver of strong sales.

The fundamental tailwinds were on full display in Q2. Apple’s successful development of its own chips has rejuvenated PC sales, with Mac’s increased performance, speed, and battery efficiency. Replacing Intel’s (INTC) chips has continued to bolster margins, demonstrating that the successful chip…

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