What A Recession Would Mean For Apple Stock

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Apple Financial performance has been strong over the past two years, driven by increased demand for computing devices as the trend toward remote working and learning accelerated through the pandemic. For perspective, in FY’21, Apple’sAAPL
Revenue increased nearly 40% compared to 2019 levels, driven by increased sales of iPhone, Mac and services. Apple’s margins have also expanded significantly with a gross margin of 43.7% in Q2 of FY19, driven by a more favorable product mix, higher services sales and growing volumes, up from around 38% in FY19 . However, investors are worried whether this momentum will continue. The US economy may be headed for a recession, as the Federal Reserve raises interest rates more aggressively to combat rising inflation. The central bank raised 0.75% just last week, the highest since 1994, and more similar hikes are expected in the coming months. Consumer confidence is also declining, as rising energy, grocery and housing prices eat into the household budget. Apple stock is already pricing in some economic pain, with the stock down about 28% year-over-year.

So how will a potential slowdown hurt Apple? Demand from consumer electronics companies is diverted to discretionary spending, which may decline as the economy worsens. Apple may see some pressure on its sales as people are likely to delay purchases of the company’s fast-growing products. Furthermore, unlike the Great Recession of 2008, which the company navigated with relative ease since the iPhone was just launched, Apple’s core smartphone market is increasingly saturated, with the company increasing prices and driving up sales. for its ecosystem impact. That said, there are a few trends that could help Apple’s business outperform its peers. Apple’s rapidly growing services business is responsible for a greater mix of sales and profits, and we expect this business to perform well despite the downturn. Wireless carriers are also likely to support iPhone sales through discounts and promotions, as they seek to bring more customers to their 5G networks. Moreover, economic indicators do not point to a very deep recession this time around, household savings are on the rise after the pandemic and banks are also well capitalised.

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We think Apple stock remains a good value at its current market price of approximately $132 per share, trading at approximately 21x forward earnings. This is well below the 31x multiple seen in 2021 and 38x in 2020. In addition, Apple’s solid balance sheet, with more than $190 billion in cash, as well as its share repurchases, may enable the stock to outperform the broader Nasdaq index. a recession. We have a valuation of $179 per share for Apple, which is approximately 35% ahead of current market value. View our analysis appraisal of applesIs AAPL Stock Expensive or Cheap? For an overview of what’s driving our price estimate for Apple. Plus, see our analysis apple revenue For more on the company’s major revenue streams and how they trend.

Stock prices across sectors have fallen sharply in recent months and we are now in a bear market for the first time since March 2020, when the COVID-19 outbreak triggered a market crash. We capture key trends in the Dow during and after major market crashes in our interactive dashboard analysis.market crash comparison,

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