Apple Inc. (NASDAQ:AAPL) stock has seen its growth momentum kneecapped in 2022. On Jan. 3, the company briefly hit a $3 trillion valuation — the first publicly traded company to do so. However, the macroeconomic factors that have hammered tech growth stocks this year have not spared Apple. Oil tops iPhones in this economy. At this point, AAPL stock is down more than 26% since the start of the year. The situation is bad enough that Bloomberg wrote the risk of a recession makes the company’s ability to maintain a $2 trillion market capitalization (cap) seem to be “looking wobbly.”
Illustrating the growing concern that a recession will cut consumer spending, Deutsche Bank recently cut its price target for AAPL stock from $200 to $175.
Given the situation with Apple stock and the red flags being raised about the impact of a potential recession on Apple, is now really the time to be buying AAPL stock? The reality is that shareholders may indeed be in for further volatility. However, shares are relatively cheap and AAPL has proven to be a performer when it comes to long-term growth.
Consumers Can’t Get Enough of Apple
Apple is in an enviable position. Sales of smartphones and PCs may be softening, but Apple continues to perform strongly. Apple’s iPhones are top-sellers, consistently putting the company in second place overall globally. While global PC sales began to shrink again after two years of pandemic-fueled growth, Apple has seen its Mac sales continue to grow.
The company’s Services division is seeing tremendous, sustained growth. Apple Music subscriptions, App Store sales, Apple Pay, and others have turned Services into a revenue machine. In the last quarter, Services accounted for 20% of the company’s revenue. However, as InvestorPlace contributor Bret Kenwell recently pointed out, it’s not just the revenue. Services has a whopping 72.6% gross margin. It now accounts for a third of Apple’s gross profit.
If you’re worried about consumers cutting back on spending, they are more likely to put off buying a $1,500 MacBook than they are to cancel a $9.99 subscription to Apple Music or to stop using Apple Pay. Services become a cushion against the possibility of a recession putting a damper on consumer spending.
In addition, ongoing supply chain issues have meant Apple has been unable to meet demand for months. Apple Chief Executive Officer Tim Cook said shortages cost the company an estimated $6 billion in the fourth quarter of 2021. The new MacBook Air was announced last week, but won’t be available to pre-order for weeks due to factory closures in China. This backlog of demand may have a mitigating effect on the impact of a recession.
Deutsche Bank Cuts Price Target, But Maintains Buy Rating
It’s worth taking note of a recent analyst move regarding Apple stock. Earlier this week it was reported that Deutsche Bank analyst Sidney Ho cut his price target for AAPL from $200 to $175. However, he kept his rating for AAPL stock as a “buy.” Additionally, that $175 price target implies around 32% upside.
In other words, economic storm clouds may have an impact on both consumer and enterprise information technology computer spending. But the impact is not expected to be bad for Apple and it may well be short-lived. In the longer term, new hardware releases, including an anticipated AR headset, old favorites like the iPhone, and Services will continue to power this company’s stock for long-term growth.
Bottom Line: Should You Buy AAPL Stock?
If you are nervous about what moves like the Federal Reserve’s historic 0.75% rate hike will do to consumer spending and the stock market, you may not have the appetite for a tech stock right now.
However, despite the challenges of 2022, including the risk to dipping below a $2 trillion market cap, AAPL stock is a proven performer. It maintains a “B” rating in my Portfolio Grader. Over the long-term, it is highly likely to deliver strong growth. It may no longer be the world’s most valuable company, but it remains the world’s most valuable brand.
Apple stock remains a solid buy for your growth portfolio, especially at its current discounted price.
— Louis Navellier and the InvestorPlace Research StaffCould This Stock Be the Best EV Play of 2022? [sponsor]
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Source: Investor Place