On Friday, the shares of Apple Inc. (NASDAQ: AAPL) rallied 7% after the iPhone maker reported the iPhone maker's blockbuster earnings. Investors were upbeat about the news, and in a note, Apple teased its metaverse ambitions. This one-day rally represents the most significant daily jumps in a year and a half for the company’s shares.
You would recall that recently due to the supply chain constraints being felt worldwide, tech stocks have been recording losses resulting in a selloff in these stocks, especially growth stocks. Apple has not been immune to that market reaction. Despite that, there is a lot that other companies can learn from Apple as it was able to make sales of $124 billion with a profit of $34 billion, which showed that Apple has learned to survive amidst these constraints.
While Chief Executive Tim Cook released the reports, he teased Apple’s ambitions in the metaverse as he explained its steps to expand its library of 14,000 augmented reality apps. Investors were enthusiastic about this, and they became optimistic about Apple.
From online reports, at least 11 brokerages have upgraded the stock’s price targets and arrived at a median price target of $188.5, according to data from Refinitiv, which we closely watch. On Friday, the stock ended the day at $170.33.
With inflation and expectations of the Fed raising interest rates, a lot of pressure is on Big Tech stocks, which have been affected by the selloff. Apple is also affected along with Alphabet (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT). But on Friday, after its shares’ rally, it became the top contributor to a rally on the S&P 500 and NASDAQ. For the year, Apple remains down at 4%.
3 Reasons To Buy Apple Stock
The market is upbeat about Apple. Nobody wants to see a company with the largest market cap globally fail. As of writing, Apple has a market cap of $3 trillion. Moreover, a lot is going on for the company, particularly its strong iPhone sales and its ability to outcompete its rivals. These are some reasons investors are issuing an enthusiastic “BUY” for Apple shares.
For one, Apple is known for having supply chain prowess. It would take a lot to disrupt its production lines even when other companies feel the crunch. Second, many tech companies will be watching Apple and learning from her. Third, there is a surging demand for Apple products, including the iPhone, iPad, Mac, wearables, and accessories. All of these are hitting recording highs in sales. I see that demand not relenting in the short term.
Also, Apple is a leader in manufacturing 5G-enabled technology as reports show that consumers are adopting 5G at a faster rate than they did 4G. In addition, reports have it that Apple will release a foldable smartphone next year to complement the contributions of 5G technology to its sales growth. Although Apple might be late, its technology usually outcompetes its rivals.
Finally, it has a vibrant free cash flow. Although Apple's stock price is somewhat high, Apple is not overvalued. It has a price-to-free-cash flow ratio of 31, which shows it is still relatively cheap to buy. Moreover, Apple’s free cash flow will increase this year and will be a boon to investors.
Today, buying Apple’s shares is a good investment, especially if you intend to hold them long-term.
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