Apple defies the Big Tech meltdown and remains the stock to own, not trade

Published Thu, Oct 27 20228:38 PM EDTUpdated Fri, Oct 28 20229:22 AM EDT

In an otherwise brutal week for Big Tech, Apple (AAPL) was the sole outlier, beating estimates for sales and profits after the bell on Thursday. It proves once again that the world's most valuable company is a stock to own, not trade. Revenue rose 8% year-over-year to $90.1 billion, exceeding expectations of $88.9 billion and marking a September quarter record. That was despite a foreign-exchange drag of more than 600 basis points. Earnings of $1.29 per share came in ahead of the consensus $1.27. Operating income of $24.9 billion outpaced expectations of $24.5 billion. Gross margin was 42.3%, in line with estimates. Bottom line The demand for Apple's products — and the loyalty of its customers — can't be overstated. Despite growing fears of a recession and a strong U.S. dollar that dents international sales, Apple sales posted a September quarter record for the Americas, Europe, Greater China and the rest of Asia-Pacific. The company's iPhone business slightly missed expectations: Revenue hit $42.63 vs. $43.21 billion estimate. Still, that represented growth of nearly 10% over last year. On top of that, Apple's ecosystem for services is as strong as ever and signaled more growth ahead. The installed base of active devices hit another all-time high. iPhone and Mac lineups reported a quarterly record for upgrades. A double-digit increase in customers switching to iPhones. Nearly half of Mac buyers new to the device. More than half of iPad buyers new to the device. Two-thirds of Apple Watch buyers new to the product. Despite these strong growth trends and our positive long-term view on Apple, we are trimming our price target to $175 from $195. This is an acknowledgement that tech valuations are shrinking across the board. We reiterate our 1 rating, which means we would buy shares at current levels. Companywide results Operating cash flow of $24.13 billion was in line with expectations of $24.24 billion and marked a September quarter record. After backing out payments of about $3.29 billio