Technology kingpin Apple Inc. (NASDAQ: AAPL), described by Warren Buffett as “probably the best business in the world”, reported a rare miss in their latest quarterly earnings expectations. Market participants didn’t react negatively and have held onto hopes that the tech giant will regain control and exceed earnings expectations in subsequent quarters as the general macroeconomic environment improves.
A Poor 2022 for Technology Stocks
Market participants, investors, and traders alike will remember 2022 as a rather dismal year for the stock market, with the S&P 500 losing nearly 20% over the twelve months, recording its worst-performing year since 2008. In particular, technology stocks were significantly down by the end of the 2022 financial year, with the growth-heavy sector prevailing as one the most significant underperformers, returning -28.2% for the year.
Seeing that value stocks outperformed their growth counterparts by the second widest margin in 2022 – as can be seen with the Russell 1000 Value Index returning -7.6% and the Russell 1000 Growth Index returning -29.1% – it is no surprise that technology stocks experienced one of their all-time worst performing years. 2022 was the first year in which the tech-heavy NASDAQ saw four consecutive quarters of declining value, recording its third-worst performing year after the 2008 financial crisis and the dot-com bubble burst in 2000.
Looking at the NYSE FANG+ Index (NYFANG), whose constituents consist of the original FAANG stocks and other actively traded technology stocks such as Alibaba, Baidu, Tesla, and Microsoft, it is clear that 2022 saw technology stocks fall consistently from the highs last seen in late 2021. Despite 2022 being a ‘year-to-forget’ for technology shareholders, growth and technology stocks have somewhat rebounded in early 2023.
Let’s look closely at the ‘trillion-dollar’ multinational technology company, Apple Inc. (NASDAQ: AAPL).
Technical Analysis:
Technically, we can see the price action has increased over the past few weeks as bullish sentiment entered the market. The price action on Apple is currently retracing from the major $157.47 per share resistance level, which will be watched closely for a break higher. If iPhone sales increase over the next quarter or so against an improved macroeconomic environment, the bulls could see the price action rise towards the major resistance zone at $183.09 (green line). Investors should take note of the price gap (purple squire) on the daily chart as the price retraces from the major resistance level and could see a possible gap close scenario in play.
For the bear case, if negative sentiment takes over, prices could see lower levels of support reached at $133.45 (lower black dotted line), which could possibly provide a better entry point for long-term investors.
Fundamentals:
With technology giant Apple recently reporting its first-quarter earnings results on Thursday, 2nd of February 2023, market participants were left concerned after the company said a rare miss on expectations. Apple CEO Tim Cook is taking the stance that “supply issues and a troubled economy were to blame”.
Apple’s most recent earnings results were somewhat disappointing, with the group’s first-quarter figures coming in below expectations and representing one of the company’s worst-performing quarters over the past few years. The mega-cap technology giant reported one of the group’s largest declines since 2016 and the first year-over-year sales decline since 2019, where overall revenue for the latest quarter came in at $117.2 billion, down 5.49% year-over-year. Against Refinitiv consensus expectations, Apple reported a quarterly earnings per share (EPS) figure of $1.88 against expectations of $1.94, coming in at a 10.9% year-over-year decline. Not only did iPhone, Mac, and iPad revenue figures miss quarterly expectations by some margin, but iPhone revenue came in at a significant 8.17% year-over-year decline. Despite Apple reporting its first quarterly earnings miss against consensus expectations in nearly seven years, iPhone sales are expected to decline less in the second quarter, which should help boost investor confidence.
Apple CEO, Tim Cook, stated that “the challenging macroeconomic environment affected iPhone sales”, with the primary iPhone assembly plant in China being negatively impacted by Covid lockdowns where the supply of the latest iPhone 14 Pro and iPhone 14 Max was significantly reduced.
Closing at $150.82 on Thursday, the 2nd of February, Apple saw its share price drop in extended trading as the company reported a miss in earnings against consensus estimates, opening at $148.03 on Friday. However, Apple’s latest quarterly earnings report offered investors a few attractive points despite missing expectations. The technology company disclosed that it now has a stellar 2 billion active devices, a healthy increase from the figure reported twelve months ago, where Apple revealed it had approximately 1.8 billion active devices. With solid growth in its services business and better-than-expected macroeconomic employment data in the U.S., Apple’s share price surged on Friday, the 3rd of February, closing at $154.50.
Sources: CNBC, Forbes, Financial Times, Apple, Trading View, Nasdaq, CNN
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