Apple (NASDAQ: AAPL) Knocks It Out Of The Park

After seeing the NASDAQ index fall close to 20% from the end of December through last week, knock-out earnings from Apple (NASDAQ: AAPL) were just what the tech sector needed to steady the ship. And boy did they deliver last week. Top line revenue of almost $124 billion smashed analyst expectations, and showed year on year growth of 11%. Bottom line EPS also came in ahead of the consensus, and there was a strong feeling internally that this wasn’t the last big bang from Apple before runaway inflation starts to dent their quarterly numbers.

Indeed, CEO Tim Cook was about as positive about the future as you could want a CEO to be, saying with the release that “this quarter’s record results were made possible by our most innovative lineup of products and services ever. We are gratified to see the response from customers around the world at a time when staying connected has never been more important.”

Luca Maestri, Apple’s CFO, followed this up when he commented on how “the very strong customer response to our recent launch of new products and services drove double-digit growth in revenue and earnings, and helped set an all-time high for our installed base of active devices. These record operating results allowed us to return nearly $27 billion to our shareholders during the quarter, as we maintain our target of reaching a net cash neutral position over time.”

Shares Bouncing Back

Returning that much cash to your shareholders in a full year, let alone a single quarter, is no mean feat, and helps to explain why Apple shares were trading at all-time highs at the start of January, before they got sucked down with the wave of selling in tech stocks. They’re already after coming off their lows on the back of last week’s report however, and are since up a full 10%. The fact that the NASDAQ index has had its first run of three green days since December over the same time period makes it appear as if Apple is single-handedly dragging the sector up with it, and maybe it is. 

Strong year-on-year growth in the company’s Services segment, as well as their Mac and Wearables units confirmed to investors that Apple is a well-rounded revenue-generating machine, with enough fingers in enough pies to tick the diversification box on any investing checklist. Morgan Stanley called the report a “clean quarterly beat”, and upped their price target on Apple shares from $200 to $210 in the aftermath of the report. This suggests there’s upside of around 20% from where the stock closed on Tuesday night, and would put shares well above their previous all-time high. Analyst Katy Huberty pointed to Apple’s overall strength, but in particular its “stickiness”. 

In a note to client, Huberty wrote "Apple's December quarter was one of the cleanest quarters in recent memory as revenue, gross margin, and EPS all beat our above-consensus forecast, with Mac and Services growth particularly strong. When coupled with a stronger than anticipated March quarter guide despite difficult Y/Y comps and continued (but easing) supply constraints, tonight's results illustrate the strength and stability of Apple's product and services ecosystem, a clear differentiator in a more difficult market environment."

Getting Involved 

The team over at Wells Fargo were also big fans of the report, and feel the tech giant's potential for gross margin expansion is still potentially "unappreciated" by the market. Analyst Aaron Rakers maintained his Overweight rating and $205 price target, and was pleased to note that any supply chain concerns that dogged the company throughout 2021 are clearly lessening, an observation that CFO Luca Maestri also confirmed.

For investors thinking about getting involved, or adding more to an existing position, there’s not a whole lot more you’d like to see from Apple right now. They’ve just locked in an amazing quarter in the face of supply chain concerns and rampant inflation, two headwinds that are hurting many of their peers, but appear to be stronger than ever. In addition, with a notably strong dividend and share repurchase program for a tech company, investors have another two more great reasons to buy into the phenomenal growth.