With more than $2 trillion in market capitalization, Apple (AAPL) is one of the largest companies in the world. It has all the resources to sail through the difficult times and keep growing with time. Nonetheless, Apple’s size has not kept it immune from the current issues that are weighing the economy down. The iPhone-maker itself expects as much as an $8 billion hit on sales in the June-end quarter, due to the persistent component supply constraints, which have been aggravated by the Covid-led lockdowns in China. Moreover, Apple also expects revenue headwinds from the stoppage of shipments to Russia.
It’s almost the middle of the year, and stock market volatility shows no signs of abating. Investors were already hurting from severe market falls when the Federal Reserve boosted interest rates by three-quarters of a percentage point last week. Although the central bank made it obvious that it was taking efforts to combat inflation, its actions stoked fears of a coming recession. Investors are looking for a reminder to stay focused on their long-term goals. According to TipRanks, which analyses the best performing analysts, the top Wall Street experts are picking their preferred selections even as uncertainty looms.
Macroeconomic headwinds are making Apple’s near-term outlook cloudy, but analysts are looking at the long-term prospects. Deutsche Bank analyst Sidney Ho recently reiterated a buy rating on the stock despite trimming the price target to $175 from $200. Although Apple did not provide guidance for the fiscal third quarter, Ho expects low single-digit year-over-year growth, taking the growth obstructions into account.
Sidney Ho holds the spot at No. 127 among almost 8,000 analysts followed on TipRanks. Moreover, he has been successful at 72% of his stock ratings, returning an average of 22.3% on each. Deutsche Bank’s Ho is also bullish on is NetApp (NTAP), which provides enterprise storage and data management solutions. The stock has been no stranger to the current setbacks weighing industries down, and its shares have declined about 30% in the year-to-date period.
Looking at the persistent geopolitical issues, rising interest rates and slowing consumer spending, the analyst said that he wouldn’t “be surprised to hear more chatter about Apple cutting orders.” No doubt, the stock has shed almost 26% in 2022. But Ho finds this performance as good as, or even slightly better than its mega cap peers. Further, he said, the macroeconomic headwinds will not allow the AAPL stock valuation to reach its 5-year high of more than 30 times earnings per share in the next 12 months, giving another reason to consider adding the stock now. (See Apple’s Stock Chart on TipRanks)
The higher costs of components and logistics that resulted from supply chain constraints have dented the company’s margins. These issues are likely to be near-term hurdles. Despite the headwinds, NetApp is showing tremendous execution capabilities, and the company has managed to keep its balance sheet strong and in a net-cash position. Having a strong balance sheet has helped this tech giant be consistent with its dividend payments. (See NetApp Dividend Date & History on TipRanks) Ho points out that the company’s shares have underperformed its IT hardware peers by a significant margin in 2022. However, this has opened a great buying opportunity for compounding returns in the long run.
The analyst was a little disappointed when NetApp could not reach its own public cloud annual recurring revenue target due to higher customer attrition and salesforce turnover in the cloud operations unit. However, Ho is not too worried, as NetApp has plans in place to address these issues. Additionally, Ho is confident that the company’s shift in focus from merger and acquisition activities to share buybacks will boost per-share earnings growth. The analyst reduced the price target from $90 to $84, but upgraded the NTAP stock to buy from hold, keeping in mind the long-term upside. Cloud software powerhouse Oracle (ORCL) is one of the few tech companies tactfully navigating the broader market headwinds. (See Oracle Hedge Fund Trading Activity on TipRanks)
Its upbeat quarterly results came as a breath of fresh air amid the disastrous winds of the season. Moreover, its guidance for the current quarter, which includes the acquired assets of Cerner, is also encouraging. Last December, Oracle announced it would acquire Cerner, which provides IT solutions for the health-care sector. Monness Crespi Hardt & Co. analyst Brian White was among those optimistic about Oracle. He highlighted Oracle’s confidence in its cloud momentum, which it expects to continue in the fiscal year 2023.
White also finds significant upside potential to the current valuation despite his forward 12-month price-earnings target being above its recent highest valuation. This is based on the belief that “the successful creation of a solid foundation to support strong cloud growth in the coming years has the potential to increasingly provide the market with more confidence in the company’s long-term business model.”