Apple Stock Rises After Dismal Q1, but Strengthening Customer Base Provides a Tailwind

Apple Stock

Apple Stock (NASDAQ:AAPL)

After reporting a weaker-than-expected first quarter, Apple (NASDAQ:AAPL) stock recovered and climbed almost 3.5% by midday on Friday. The company’s dismal performance was caused by foreign currency and supply chain concerns. According to some investment banks, this “solidifying” client base will be a boon for the corporation far beyond 2023.

Apple’s growth narrative “holds up much better than the Street had expected in this uncertain economic environment,” said Dan Ives, an analyst with an outperform rating at Wedbush Securities. This is especially true as China begins to emerge from its economic lethargy caused by COVID.

In a message to investors, Ives said, “With China the hearts and lungs of the Apple narrative, this Cook speech was essential and will be digested thoroughly by investors this morning.”

CFO Luca Maestri said on the conference call that the March quarter’s sales performance is likely “comparable” to the December quarter, indicating an acceleration. In addition, Apple sees foreign currency as a headwind contributing to a -5 percentage point negative impact.

However, digital advertising and mobile gaming are forecast to continue their decline, offsetting the predicted growth in services income. While the iPhone is predicted to increase sequentially, the iPad and Mac will decrease by double digits year over year.

Maestri said operational expenditures will total between $13.7B and $13.9B, with gross margins falling between 43.5% and 44.5%.

Ives said that Apple’s March quarter outlook was “conservative” and that the company’s 2 billion active devices (including an estimated 1.2 billion iPhones) “speaks to a strong and rising customer base.”

With “services monetization in focus,” Wells Fargo analyst Aaron Rakers, who has an overweight rating and $185 price objective on Apple stock, emphasized the significance of the ongoing recovery in the supply of the iPhone 14 Pro and iPhone 14 Pro Max.

Due to the strength of the services and installed base, Citi analyst Jim Suva said that Apple’s quarterly earnings and the forecast will be flat when adjusted for foreign currency.

Apple stock is now valued at $175 by Suva and has a buy rating.

Senator Michael Bennet of Colorado sent a letter to Apple CEO Tim Cook and Google CEO Sundar Pichai on Thursday, requesting that they remove the app TikTok from the iOS and Android app stores.

Featured Image: Pexels @ Armand Valendez

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