Apple cuts iPhone, AirPods production; is it still a buy?

Posted: 28 March 2022 3:40 pm
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Slowing demand due to inflation and the Ukraine conflict could make for a rougher quarter, but the dominant phone maker is still expected to see gains.

In what might be a small dent in its iPhone business, Apple (AAPL) is cutting production of its lowest-price model, the SE, as well as its AirPods, with demand slowing amid inflation and the Ukraine war.
A report in Nikkei — the world’s largest financial newspaper — said suppliers will produce 2 million to 3 million fewer phones next quarter than originally planned and about 10 million few AirPods units in 2022.
The popular iPhones provide roughly half of Apple’s revenue, but investors are taking the news in stride with shares down only about a half-percent at midday. And that’s after a string of nine positive days for the stock.
Of the market’s mega-caps, Apple still seems to be one that investors want to own most. And the numbers show why.

Where Apple stands

With a market cap of $2.84 trillion, Apple is the market’s biggest stock, just ahead of Microsoft (MSFT) at $2.28 trillion.

The stock dropped earlier this year with most of the tech world, but the decline is just 1.6%, better than most of its peers in the so-called FAANG group of influential techs. Amazon (AMZN), with just a 1.17% loss this year, is the only FAANG member doing better, and its 12-month gain of 7.9% is dwarfed by Apple’s 44% gain.
Alphabet (GOOGL) is close but behind on both numbers, while Meta Platforms (FB) and Netflix (NFLX) show deep declines this year and over 12 months. (For more on these stocks, read “The FAANG stocks are on sale now.”)
One potential drawback: Apple stock is now close to the all-time high of $182.94 set in January, so you’re not buying a bargain on a dip. You’re buying on future prospects.

What’s ahead

Inflation and the Ukraine conflict could trouble Apple for some time, as could a new COVID outbreak in China, where Apple is the most common phone brand. But there are some big opportunities as well, including:

  • An Apple TV movie, “CODA,” won the Academy Award for Best Picture Sunday night, highlighting growth and maturity of the streaming service best known for “Ted Lasso.”
  • The company is working on a subscription service, including devices like iPhones, which might lead to more frequent upgrades. With more than 1 billion iPhones in use worldwide, according to Apple, that could have a big yield.
  • The next line of iPhones is expected out this fall.

Overall, the analyst consensus price target for Apple is $193, roughly an 11% gain in 12 months. From a reliable tech leader in a rough market for tech, that may make the stock a buy. Just keep in mind you’re buying close to an all-time high for longer-term growth.

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