Look to buy Apple on weakness after next week's earnings report

Published Wed, Apr 20 20223:00 PM EDT

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

Apple (AAPL) is set to report fiscal second-quarter earnings late next week. Any decline in the stock price after the results could be a buying opportunity. Big picture Jim Cramer's mantra on the iPhone maker has long been "own Apple, don't trade it." That's as true today as it's ever been. We're spotlighting Apple as a potential buy on post-earnings declines because our confidence in the company was strengthened by Morgan Stanley's head of technology research Katy Huberty. Simply put, the Club is a big fan of Huberty's work, and we want to call attention to where she stands. Apple is scheduled to release its March quarter results after the close April 28, which is next Thursday. Morgan Stanley's view In a new note, Huberty reiterated her overweight rating on Apple stock and a price target of $210 per share, which implies about 25% upside from its Tuesday close. Here's a quick summary of Morgan Stanley's outlook: The analyst team, led by Huberty, believes strong demand for the iPhone 13 and Mac computers will help Apple beat expectations for the March quarter. The strength of those two product lines should "more than offset" softness in iPad and wearables like Apple Watch. Covid lockdowns in China may prompt Apple to adopt "a more cautious stance" for its June quarter, so the analysts think Wall Street's current revenue projections could be a bit high. Our focus is on Morgan Stanley's stock takeaway. Here is what the analysts wrote about that (emphasis in bold text is ours): With this setup, we don't believe investors need to be aggressive ahead of the quarter ; however, we'd continue to buy shares on any weakness as we expect Apple to remain an outperformer in this more challenging market, similar to outperformance in past late economic cycles ... given its strong brand, product/services innovation, and recurring purchases from higher-end consumers, which keeps Apple relatively more insulated from macro factors. Huberty also highlights Apple's buyback program and institutional ownership as two factors supporting the stock in the face of broad market weakness. Upcoming product launches — such as the latest iPhone model in the fall, plus Apple's anticipated virtual reality headset next year — could also help drive a re-rating of the stock, according to Huberty and Co. Club's position Reminder: We trimmed our Apple holdings last week , selling 350 shares at roughly $166 apiece, because the stock's weighting in our portfolio had grown too large. Just before our sale, on April 11, it had a 6.75% weighting. Now, Apple is at nearly 5% as we continue to own 975 shares. Since April 11, we've also had a 2 rating on the stock, meaning we'd be buyers on weakness. On Wednesday's Morning Meeting, Cramer said about Apple: "If this thing gets down 10 [dollars], I'm back." The stock was trading at nearly $168 per share at the time. (Jim Cramer's Charitable Trust is long AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An iPhone 13 Pro advert in the Apple Inc. store on Regent Street in London, U.K., on Friday, Sept. 24, 2021.

Chris Ratcliffe | Bloomberg | Getty Images