- Tech names have been getting slammed over lower valuations, but Apple still remains attractive
- Consistent price hikes and solid consumer loyalty underpin reliable revenue growth
- Morgan Stanley analyst expects upside to Street revenue consensus for Apple's Q2 earnings next week
Understanding value can be laden with obstacles. Amongst high-growth tech names, we’ve recently seen a down curve in buyer interest as high-strung future valuations are tarnished by inflationary worries. This means that popular names like Apple (NASDAQ: AAPL) are feeling earnings pressure more than ever, also dealing with supply chain hurdles affecting production and supply. Looking forward however, Apple hasn’t lost any of its longstanding allure; its solid positioning, strong ecosystem and durable product line are all still firmly intact.
Just looking at price hikes over the years, Apple hasn’t repelled much – if any – of its loyal consumer base despite constant changes to product pricing. Just in the last 2-3 years, the standard iPhone has leaped by around $100; and there’s no reason to justify why this would teeter off as more innovative products hit the production lines, inevitably boosting revenue.
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Looking at analyst opinion, Katy Huberty from Morgan Stanley argues that product strength remains incredibly strong ahead of Apple’s Q2 report coming next week. Whilst sales in iPad and Services are slightly downtrodden, strong growth in iPhone 13 and Mac sales will likely offset any underperformance. Following this thesis, Huberty expects upside to the Street’s Q2 revenue consensus.
On a further note, Huberty exclaims that any weakness ahead of product launch catalysts set for later this year should be an inherent buy – maintaining an Overweight rating and $210 price target for AAPL.
Apple’s long standing economic moat coupled with its loyal consumer ecosystem effectively allows the company to raise its prices without deterring demand, breed excitement and anticipation for its products and services, all whilst expanding into new growth markets; such as its recent plans to allow small businesses to take Apple Pay payments through their iPhone, removing the need for external payment servicing hardware – a potentially huge breakthrough for the payments sector.
Any forthcoming weakness in Apple shares should be seriously considered, with earnings next week, investors should look for entry points based on the expected upside to the Street consensus.