Apple’s sales for Q2 FY’24 fell, with revenue decreasing by 4% year-over-year to $90.8 billion. Despite this, earnings were better than anticipated, at $1.53 per share, and Apple announced its largest-ever share repurchase authorization, leading to a 6% increase in Apple stock during extended-hours trading. iPhone sales fell almost 10% year-over-year to $45.96 billion, Mac sales rose by about 4%, and digital services revenue increased by 14% to $23.9 billion. The increasing mix of service sales and high-end products is helping Apple boost its margins, with gross margins coming in at 46.6%, up from 44.2% in the previous year.
AAPL stock has experienced strong gains of 35% from early January 2021 to around $175, outperforming the S&P 500 over a three-year period. However, the stock’s returns have been volatile, with a 35% increase in 2021, a 26% decrease in 2022, and a 49% increase in 2023. Comparatively, the S&P 500 had a 27% return in 2021, a 19% decrease in 2022, and a 24% return in 2023. The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk.
Given the current uncertain economic environment with high oil prices and elevated interest rates, there are concerns about whether Apple could underperform the S&P over the next 12 months. However, Apple is valued at about $180 per share, in line with the current market price, with potential upside from selling premium products and expanding its services. The company also has a significant opportunity in the generative AI space, utilizing on-device AI implementation while keeping user data private. Apple’s stock buybacks, amounting to $110 billion, should support its share price.
Apple’s stock performance has been inconsistent, with gains and losses in recent years. Despite difficulties in consistently outperforming the S&P 500, Apple has shown resilience and potential for growth with its focus on premium products and services. The company’s unique approach to AI and commitment to user privacy could position it as a leader in the space, driving future growth and stock performance. Additionally, Apple’s stock buyback program and strong financial position should help support its share price and drive shareholder value over the long term.
Overall, Apple’s results in Q2 FY’24 reflect a mix of challenges and opportunities for the company. While the decline in iPhone sales and challenges in certain markets may pose short-term hurdles, Apple’s strength in digital services and potential in the AI space offer promising avenues for growth. The stock’s valuation suggests a balanced outlook, with potential upside from strategic initiatives and market opportunities. As the company navigates the evolving landscape of technology and consumer preferences, investors will be closely watching Apple’s performance and strategic moves to gauge its future prospects in the market.