Apple Stock Price Down 9% in 2022 – Time to Buy AAPL Stock?

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Apple stock (NYSE: AAPL) is down 8.5% so far in 2022 and now trades 11.2% below its 52-week highs. The stock’s drawdown from the peaks is lower than that of Nasdaq which had its worst week since Q1 2020 and is now down almost 26% from the 52-week highs.

Apple was the second-best FAANG performing stock of 2021, thanks to the rally towards the year-end. The stock started 2022 on a positive note and its market cap hit $3 trillion on the first trading day itself. Apple now has the reputation of being the world’s first company to hit a $1, $2, and $3 trillion market cap. While several companies have breached the threshold of $2 trillion, Apple remains the only company that hit a market cap of $3 trillion.

Meanwhile, AAPL stock is in a correction zone having fallen over 10% from the peaks. What’s the forecast for the stock and should you buy the dip?

Apple would release its fiscal second-quarter earnings

Apple stock price

We’re now into the quarterly earnings season. This week, several giants like Apple, Amazon, Microsoft, and Tesla would release their quarterly earnings. Apple is expected to post revenues of $118.4 billion in the quarter, a YoY rise of 6.3%. The company’s growth has come down significantly over the last few quarters. Analysts expect Apple’s revenues to increase 4.2% in the current fiscal year and then 6.1% in the next fiscal year. Like many other US tech companies, AAPL is also witnessing a growth slowdown as the pandemic-driven sales boost is now fading away.

Analysts expect Apple to post an adjusted EPS of $1.88, a YoY rise of 12.1%. Its free cash flows are expected to rise almost 20% YoY to $42.5 billion. Big US tech companies have been generating a humongous amount of cash and have mostly been using the cash to repurchase their shares. Citi expects Apple to further increase the buybacks in 2022.

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Warren Buffett

Buybacks help propel the EPS higher by lowering the number of outstanding shares. While it is more of denominator management, it’s an accepted and legit way to add stockholder value. Berkshire Hathaway is the second-largest stockholder in Apple and its chairman Warren Buffett has been supportive of Apple’s buybacks.

While Buffett hasn’t added any shares since the third quarter of 2018 and has instead sold shares, the conglomerate holds a 5.4% stake in the company. The percentage holding hasn’t dropped despite Buffett selling shares, thanks to Apple’s generous buybacks.

However, Apple might have to think of ways to improve its sales growth. Recently, Microsoft announced the acquisition of Activision Blizzard for almost $69 billion. It is the biggest ever deal in the tech industry and would catapult Apple to the third position in the global gaming industry.

Apple stock forecast

Wall Street analysts are reasonably bullish on Apple stock and of the 44 analysts, 34 have rated it as a buy while eight have a hold rating. The remaining two analysts have a sell rating. AAPL has a median target price of $182 which is a 12.1% premium over current prices. Its street high target price of $210 is a premium of 29.3% while the street low target price of $105 is a 35% discount over current prices.

Apple stock target price

Analysts seem bullish on Apple ahead of the earnings release. UBS reiterated its buying rating on the stock ahead of the earnings and said “We expect Mac revenue to increase ~6% YoY to $9.2B against a tough +21% comp last year. We believe Apple’s refreshed portfolio along with persistent hybrid work/school dynamics drove share gains in Q4.”

Morgan Stanley is also bullish on Apple stock. In its note, it said, “We expect AAPL to post upside to Dec Q Street ests with an in-line guide for March, although this appears relatively priced in by the market. Revenue stability, upcoming product launches, and expansion into new markets makes AAPL more defensive in a rising rate environment.”

Investors might find solace in financially strong and mature tech companies like Apple. While growth tech stocks have plummeted, Big Tech companies like Apple are outperforming the markets.

AAPL stock long term forecast

Apple’s long-term forecast would depend on how its electric vehicle plans play out. The mobility industry has a much bigger TAM (total addressable market) than what AAPL is currently targeting. If the company can come up with an attractive value proposition like the iPhone, it can target Tesla’s dominance of the EV industry. But then, taking on the persona of Musk and the strong value proposition from Tesla won’t be an easy task.

Apple’s pivot towards services business and the expected foray into electric cars have led to a rerating of the company. Markets now see it as a software company and not a hardware company. Microsoft has also seen a significant expansion of its trading multiples as it has ventured into several high-growth industries.

Should you buy AAPL stock?

Apple’s valuation multiples have also come down amid the crash and it now trades at an NTM (next-12 months) PE multiple of 28.5x. The stock might remain under pressure for some time, however, it should eventually recover. The launch of new products including the AR/VR headsets could be the near-term triggers to take the stock higher.

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About Mohit PRO INVESTOR

Mohit Oberoi is a freelance finance writer based in India. He has completed his MBA in finance as a major. He has over 15 years of experience in financial markets. He has been writing extensively on global markets for the last eight years and has written over 7,500 articles. He covers metals, electric vehicles, asset managers, tech stocks, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.