(Bloomberg) — Even as Apple Inc. struggles. on rising inflation, cooling consumer demand, a strengthening dollar and lockdowns in China, its share price has risen in recent weeks and is headed for its biggest monthly gain in nearly two years, up 15% in July.
Shares beat shares of Microsoft Corp., Alphabet Inc. and Amazon.com Inc. this month, and gains in the S&P 500 and Nasdaq 100 indexes were also very small. With the US slipping into a recession, investors are dealing with a household name they are comfortable with.
“Apple is better because it’s a safety net for investors,” said Gene Munster, who covered Apple and Google during his 21-year career as an analyst at Piper Jaffray Cos. before co-founding venture-capital firm Loup Ventures. “Every company will be affected by the coming slowdown. Apple should be better.
The rally means investor expectations are high for the earnings report. Surprisingly positive results from Microsoft and Google parent Alphabet also upped the ante for Apple.
Apple’s sales growth has certainly slowed for five straight quarters, with the company warning in April that supply issues stemming from lockdowns in China would hamper revenue by $4 billion to $8 billion in the third quarter that ended June 30 — leading analysts project the smallest revenue increase since 2020.
The bullish case hinges on the slowdown not worsening, so Wall Street will be listening closely as Chief Financial Officer Luca Maestri outlines trends for the current quarter and possible additional impact from China and supply issues.
With inflation on the rise, consumers are thinking more about expensive purchases like smartphones, tablets and laptops. Mid-tier smartphone makers saw a drop in demand, and global handset shipments fell 9% in the second quarter, according to estimates from Counterpoint Research. Apple is still looking for ways to fuel demand for its line of premium products.
“Chinese brands have been affected by weaker demand amid lockdowns in parts of China, but in the US, we are still seeing stagnant demand for Apple devices, driven by strong carrier promotions,” said Hanish Bhatia, an analyst at Counterpoint.
Apple has also joined Microsoft and Alphabet in slowing hiring and curbing spending as it braces for an economic downturn. The company has not issued a formal financial outlook since the start of the pandemic.
This year’s market selloff has made Apple stock a bit cheaper at about 24 times estimated earnings, though shares are comfortably above their 10-year average of 16.6 times. Meanwhile, the Nasdaq 100 is sitting at 21 times estimated earnings.
“Apple can still tap into big markets around wellness, AR and automotive that could keep the company’s growth rates higher for the next decade,” Munster said. “That means investors can sleep well at night, and that’s the main reason why Apple shares have outperformed.”
Tech Chart of the Day
Three of the four major US social media companies have reported results, and it’s clear that the slowing economy and cooling ad spending are hurting their businesses. Shares of Snap Inc. fell 39%. following its quarterly report, while shares of Meta Platforms Inc. was down about 6% in premarket trading after the Facebook owner posted its first-ever sales decline. Only Twitter Inc., which received a takeover bid from billionaire Elon Musk in April, is outperforming the tech-heavy Nasdaq 100 Index this year.
Top Technology Stories
- Meta Platforms, the social media giant that includes Facebook and Instagram, reported its first ever quarterly sales decline, citing shrinking advertisers’ budgets.
- The Senate on Wednesday passed legislation that includes $52 billion in grants and incentives for US semiconductor manufacturing, an industry that has steadily lost ground to foreign competitors in recent years.
- The quarterly profit of Samsung Electronics Co. has missed estimates after cooling demand for consumer gadgets hit its chip division, prompting concern about the outlook for Big Tech in 2022.
- Qualcomm Inc., the largest maker of the chips that power smartphones, has given a lackluster forecast for the current period, saying a weakening economy will hurt consumer spending on mobile devices.
- Intel Corp. is scheduled to report. of second-quarter results on Thursday, giving investors an update on both the state of the personal-computer market and the threat from rival Advanced Micro Devices Inc.
- The euphoria surrounding the major listing plan of Alibaba Group Holding Ltd. evaporated in just two sessions, as the focus shifted to the company’s earnings announcement due next week.
- Apple has enlisted one of Lamborghini’s top car development managers in a sign it is ramping up work on a self-driving electric vehicle, according to people with knowledge of the situation.
- ServiceNow Inc., a maker of business workflow software, declined in extended trading after cutting its full-year revenue forecast on the strength of the dollar and a potential pullback in demand.
- Twitter criticized the billionaire Elon Musk for these accusations of being inconsistent in setting a specific trial date and not agreeing to hand over the documents.
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