Apple Could Report Better Than Expected Earnings

The world’s first $3 trillion company, Apple (NASDAQ:AAPL) has created history and is also a popular household name. As the company continues to grow at a rapid pace, we can expect a better than expected earnings report this year. It reports earnings on Jan. 27, and this may take AAPL stock to huge highs. The stock has climbed more than 400% over the past five years and there is no stopping its momentum.

Apple store. Apple Inc. (AAPL) sells consumer electronics, computer software, services and personal computers.
Source: Vytautas Kielaitis / Shutterstock.com

I have always loved Apple products and AAPL stock. The scale of the company’s business is mind-boggling and it has massive potential to grow. AAPL stock is up 15% in the past year and 8% in the past six months. The stock has dipped due to the recent tech sell-off but it does not reflect the fundamentals of the company.

AAPL stock is currently trading at $160 and I think the recent dip is a good chance to invest. Let’s dig deeper into what is driving the stock.

Massive Revenue Generation Potential

The growing adoption of technology across the world is a driving force for the company. We may see a dip in the December quarter shipment numbers due to Covid-19 but it is important to remember that the dip is temporary.

Apple has a huge market to cater to and it has the potential to scale. Besides the iPhone and Macs, the company generates solid revenue from its service segment. In the last quarter, the service segment revenue tripled in a period of six years and hit $18.3 billion. It broke the quarterly revenue record and earned $83.4 billion.

The consistent growth in each segment category with more people paying for apps and content has led to a huge rise in service segment revenue. The service segment could become a major source of revenue for the company by 2025. Apple’s products and service business is highly revenue-generating and it continues to grow at a double-digit rate. However, the service segment could be a strong catalyst for earnings in the near future.

What the Analysts Are Saying About AAPL Stock

I am bullish on AAPL stock and so are the analysts. The stock could hit $200 in the near future and this could only be a beginning. The 52-week high for the stock was $182 but it does have the potential to continue rising and the results could work as a catalyst. Apple is an exceptional company with a solid balance sheet and dividend history.

Katy Huberty, a Morgan Stanley (NYSE:MS) analyst expects the company to report a modest upside to the current estimates for this quarter. However, she has an overweight rating for the stock with a price target of $200 stating the revenue stability, expansion into new markets, and product launches which make the stock a defensive pick in the current environment.

Another analyst at Wells Fargo (NYSE:WFC) Aaron Rakers has a price target of $205 on AAPL stock with an overweight rating. Deutsche Bank (NYSE:DB) analyst Sidney Ho has a buy rating on the stock with a price target of $200 citing the strong portfolio across the product lines, and healthy demand. He also adds that the supply chain has significantly improved over the past few months.

Evercore (NYSE:EVR) analyst Amit Daryanani has a price target of $210 with an Outperform rating. Even in a period of tech sell-off, AAPL stock remains solid for the long term.

The Bottom Line On AAPL Stock

Apple is a $3 trillion company today and it is only going to grow in the coming years. It could create history by becoming a $5 trillion company in this decade. This number may sound too large at this stage but it does not mean that it is not possible. And AAPL stock may not be cheap then.

Buy AAPL stock before the company announces earning results this week.

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.


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