Apple Stock Price Forecast February 2022 – Time to Buy AAPL Stock?

US stocks have whipsawed in 2022 and Apple is no exception. The stock hit an all-time high on the first trading day of the year and its market cap surpassed $3 trillion.

Apple became the first company globally to hit a market cap of $3 trillion. It was also the first company to hit a market cap of $1 trillion and $2 trillion. Meanwhile, AAPL stock has also fallen amid the broader market sell-off and is now down almost 10% for the year. What’s the forecast for Apple and is it a good buy in February 2022?

Apple posted better than expected earnings

Apple reported revenues of $123.9 billion in the fiscal first quarter, which were 11% higher than the corresponding quarter in the previous year. The revenues were a new record and Apple reported record revenues in all geographies. Notably, iPhone revenues increased 9% to $71.63 billion in the quarter. While many analysts were apprehensive of the iPhone 13’s sales outlook, the sales were better than expected in the quarter. All Apple products barring the iPad reported a YoY rise in sales. The company’s adjusted EPS of $2.10 was also way higher than the $1.89 that analysts were expecting.

Apple said that its installed device base surpassed has 1.8 billion in the quarter. Also, it had 785 million paid subscriptions in the quarter, which is another record. These subscribers are expected to drive the APPL’s growth in the long term. Apple also has a cash pile of $80 billion which it is expected to use for buybacks.

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Apple buybacks

Buybacks help propel the EPS higher by lowering the number of outstanding shares. While it’s more of denominator management, it is 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.

AAPL guidance

It’s been almost two years since AAPL stopped proving forward guidance due to the COVID-19 pandemic. Commenting on the current quarter, AAPL said, “We expect to achieve solid year-over-year revenue growth and set a March quarter revenue record despite significant supply constraints, which we estimate to be less than what we experienced during the December quarter.”

For the Services business, it said, “we expect to grow strong double digits but decelerate from the December quarter performance. This is due to a more challenging compare because a higher level of lockdowns around the world last year led to increased usage of digital content and services.”

Apple was the second-best performing FAANG in 2021

Apple was the second-best FAANG performing stock of 2021, thanks to the rally towards the year-end. Amazon was the worst performer in 2021 amid concerns over slowing growth. Apple was the best performing FAANG stock in both 2019 and 2020 and bounced back sharply from the Q3 2018 lows where its market cap had tumbled below $1 trillion amid Trump’s trade war rhetoric.

AAPL stock forecast

Wall Street analysts are bullish on Apple stock after its strong fiscal first-quarter earnings. Of the 43 analysts covering the stock, 33 have rated it as a buy while nine have a hold rating. One analyst has a sell rating on the stock. AAPL has a median target price of $192 which is a 22.2% premium over current prices. Its street high target price of $215 is a premium of 36.8% while the street low target price of $154 is a 2% discount over current prices.

Earlier this month, Bank of America reiterated AAPL stock as a buy. It said, “According to our survey (six months ended in Jan 2022), more than 25% of respondents globally still have old iPhones (iPhone 8 or earlier) and we see this as an opportunity for driving a replacement cycle.”

KeyBanc also reiterated its overweight rating after its survey checks. It said, “we are optimistic on recent reports of strength in iPhone in China and India, which supports our view of AAPL’s strong new user growth, and we remain above consensus for FY22 on iPhone, Services, and adj. EBITDA.”

Apple 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 the 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.

AAPL long term drivers

AAPL also sees financial services as a long-term driver. Commenting on growth drivers, AAPL CEO Tim Cook said during the earnings call, “I would say that I think Apple Card has a great runway ahead of us. It was rated to the No. 1 midsized credit carding customer set by J.D. Power and is getting — has fast become people’s main credit card for many, many people.”

Cook added, “And the growth of Apple Pay has just been stunning. It’s been absolutely stunning. And there’s still obviously a lot more there to go — and because there’s still a lot of cash in the environment.”

Should you buy Apple 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 25.7x. The stock might remain under pressure for some time given the geopolitical environment. However, it should eventually recover as investors seek solace in quality tech companies. 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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