Should Investors Buy Falling Apple Stock?

Should Investors Buy Falling Apple Stock?

Like many tech stocks in 2022, Apple‘s (NASDAQ:AAPL) shares are down year to date with a 22% loss. Rising inflation and interest rates have hit consumer spending and other parts of the economy, causing a stock market sell-off. the Nasdaq Composite The index is down 32% so far this year.

While Apple stock has suffered, it has still fared much better than many of its tech peers. For example, Alphabet Y Microsoft they are down 39% and 32%, respectively.

The iPhone company has shown that it is capable of successfully overcoming poor market conditions. Here’s why Apple is a must-buy after its sizeable drop this year.

overcoming difficulties

On October 27, Apple released its fiscal 2022 year-end financial report, beating Wall Street expectations for revenue and earnings per share (EPS). The company reported EPS of $1.29, versus an expectation of $1.27, and $90.15 billion in revenue versus analyst consensus of $88.9 billion.

The promising results come after months of media reports that Apple was headed for turmoil, with suggestions that sales of its 2022 iPhone lineup were significantly lower than in previous years, and that its services business could run into trouble if consumers continue to cut their discretionary spending.

For the full year, revenue was up just 7.8% compared to the 33.2% increase seen in fiscal 2021. Growth has slowed considerably, but it’s important to remember the meteoric rise the industry has enjoyed. technology last year as homebound consumers during the pandemic invested in home offices and entertainment devices. In fact, all of Apple’s segments in fiscal 2021 saw growth between 20% and 40%.

Despite the lopsided year-over-year comparison, all but one of Apple’s segments posted growth in fiscal 2022. For example, iPhone sales grew 7%, which the company attributed primarily to the success of its iPhone lineup. iPhone 14, released in September. Meanwhile, its Mac segment increased 14%, portable devices 7% and services 14%. The only segment to decline was the iPad, which fell 8%, which the company said was due to lower iPad Pro sales.

However, the latest iPad Pro release was in May 2021. The newest version only came out in late October, meaning it didn’t contribute to Apple’s fiscal 2022 results.

Apple didn’t have a perfect year, but its growth, despite current market conditions, reinforces its reputation as a dominant and reliable company to buy and hold for the long term.

An ATM

As fears of a recession mount, Cash Flow it is becoming an increasingly important metric that illustrates a company’s ability to weather an economic downturn. And once again, Apple stands out above all with free cash flow of $111 billion last year.

AAPL Free Cash Flow Diagram

Data by YGraphics.

That’s enough cash generated in a single year to cover the company’s nearly $120 billion of loans, not to mention the $169 billion in cash and marketable securities on its balance sheet.

The boom in Apple’s services business is especially promising in terms of cash. The segment, which includes digital offerings like Apple Music, TV+ and iCloud, reported a gross margin of 71.7% for the year, compared to 36.3% for Apple’s product business. In fact, company-wide margins have been expanding in recent years.

Apple is an industry-leading company that can thrive in a recession or bear market. The stock is down considerably in 2022, but that should only make it more attractive to investors.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. dani cook has no position in any of the mentioned stocks. The Motley Fool holds positions in and recommends Alphabet (A-shares), Alphabet (C-shares), Amazon, Apple, Meta Platforms, Inc., and Microsoft. The Motley Fool recommends the following options: $120 long calls in March 2023 at Apple and $130 short calls in March 2023 at Apple. The Motley Fool has a disclosure policy.

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