Stock Analysis & Ideas

Apple Stock Faces Reality Check as Inflation Bites; Here’s What Next

No one has been immune from the global economic downturn, and it looks like Apple (AAPL) is now feeling the pinch too. Ditching its previous plans to up production of its new iPhones after an expected increase in demand failed to transpire, the Street voiced its opinion on this bearish development by initially pushing the shares down.

Wedbush analyst Daniel Ives is hardly surprised by the reaction.

“Clearly this negative news in light of an already shaky macro and jittery market will send shockwaves across the Street with investors concerned this is another shoe to drop in this dark market with golden child Apple front and center,” said the analyst.

However, Ives is not really concerned about the issue. According to all data points on offer in the U.S. and China, demand for the iPhone Pro “remains robust” and is leaning towards a 85%-90% mix for the iPhone 14 compared to ~65% with the iPhone 13.

“This means much higher ASPs and a clear tailwind for Apple into FY23 at this pace,” Ives explained. For some Pro models, the waiting times have now moved into early November and Ives is of the belief that ahead of the holiday season, across Asia, Apple is “shifting production from the base model to Pro.”

Ives concedes that the new iPhone’s base model sales have “clearly been underwhelming and softer than Apple expected,” which speaks to the fact that in the current weaker macro environment, consumers are unwilling to fork out for a smartphone that is “pricey with minimal enhancements” compared to the iPhone 13. However, the Pro model, says the analyst, is a “complete other story seeing positive demand.”

So, down to business, what does it all mean for investors? Ives sticks with an Outperform (i.e., Buy) rating, backed by a Street-high $220 price target. Should the figure be met, investors will be sitting on returns of 47% a year from now. (To watch Ives’ track record, click here)

Looking at the consensus breakdown, based on 22 Buys, 4 Holds and 1 Sell, the stock claims a Strong Buy consensus rating. The analysts see shares climbing ~32% higher over the coming months, considering the average target stands at $182.89. (See Apple stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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