Why Apple Shares May Have Room to Move Higher After Earnings

Shares of Apple (NASDAQ: AAPL) continue to climb the day after the company delivered better-than-expected earnings. The report is calming market fears that the consumer appetite for the company’s signature iPhone is waning.  

In early trading, AAPL stock is up more than 3% at $162.51 per share. That puts the stock right in between its 52-week high and low. It also means the stock is up 16% in the last 30 days and is up 11% in the last 12 months.  

As Apple Goes, So Goes the Market 

I reappropriated that idiom from former General Motors (NYSE: GM) CEO Charlie Wilson who famously said, “As GM goes, so goes the nation.” Wilson was describing how GM’s size influence made the company a bellwether of the nation’s economy.  

When Wilson coined that phrase, he wasn’t just talking about selling automobiles. It was about the company’s influence on management and marketing trends. Which brings me back to Apple which is becoming a proxy for global growth.  

Earlier in July, Apple brought the entire market lower when it announced that it was going to be slowing its rate of hiring. Conversely, the company’s solid earnings report seems to be reassuring the market. Specifically, Apple reported earnings per share (EPS) of $1.20 better than the $1.14 expected by analysts.  

The headline number was the company’s iPhone and iPad sales which continue to show strength. Specifically, iPhone revenue was $40.67 billion for the quarter which was higher than expectations for $39.2 billion. And IPad revenue came in at $7.65 billion which was above expectations of $7.14 billion.  

Results That Go Beyond the iPhone 

But this report is about more than product sales. Apple continues to deliver strong results on the Services side of its business. Revenue for that side of the business rose to $19.6 billion which was 12% higher on a year-over-year (YOY) basis.  

And the results also show that Apple’s business model continues to show resilience in the face of supply chain challenges. This was particularly evident in how the company executed its strategy in China in the face of continuing Covid lockdowns. 

It also is giving many other CEOs a master class in how to manage investor expectations through the quarter. Of course, critics may argue that Apple CEO Tim Cook lowered the bar to a point where the company couldn’t help but jump over it. However, there’s nothing in the earnings report that suggests the company’s obstacles weren’t real.  

Not Everything Was Great 

There were some “less good” aspects of Apple’s report. Revenue of $92.86 billion came in essentially as expected. And although that was higher when measured YOY, the $1.20 earnings per share came in 7% lower on a YOY basis.  

And the company did acknowledge a sharp slowdown in sales of its Mac computers. The slow down in sales of desktop computers was also notable in the earnings report of Intel (NASDAQ: INTC). Apple also noted an 8% decline in Wearables which came in at $8.1 billion.  

Analysts are Weighing In  

Analyst reactions have been mostly bullish with Citigroup (NYSE: C) and Barclays increasing their price targets. In issuing the adjusted price target, Citi analyst Jim Suva commented:  

“While investors were concerned about the general slowdown in consumer spending, Apple posted an all-time high over 1.8 billion installed base, which sets up well for future services sales, upgrades, and replacements,” he wrote in a note to clients.” 

And even the analysts that are lowering their price targets are not lowering their rating for APPL stock. The consensus rating for Apple remains a Moderate Buy with a price target of $179.