• Apple shares will lose more than a quarter of their value in 2022
• Citi expert Jim Suva gives six reasons for Apple’s potential
• CFRA analyst also confident about the iGroup
The difficult market environment of 2022 also left its mark on the most valuable company in the world, Apple. Apple shares lost 26.83 percent last year in the wake of rising inflation, rising key interest rates, supply shortages, skyrocketing energy prices and corona lockdowns in China and ended 2022 at a price of 129.93 US dollars . However, the iGroup was far from alone in this fate. In the end, tech stocks in particular got lost in an environment characterized by uncertainty. The US index for tech stocks NASDAQ Composite lost 33 percent last year.
Citigroup gives Apple stock a thumbs up
According to the opinion of various analysts, however, the trend reversal should take place in 2023. In a 20-page customer report on Apple stock available to Yahoo Finance, Citi expert Jim Suva gives six good reasons that he believes would indicate strong upside potential for the share certificate. He gave iGroup’s stock a buy rating and price target of $175.
Apple’s share buybacks and dividends
One argument that Suva makes in its report is that the company, led by Tim Cook, is expected to give its shareholders this year. The tech analyst assumes that the iGroup, given its well-stocked cash reserves, should pay out more than 110 billion US dollars a year to its investors in the form of share buybacks and dividends. “In the spring of 2023, we expect Apple to announce a significant $85 billion share buyback program after spending approximately $90 billion in fiscal 2022. We also expect the company to increase its dividend by 10 percent.” , writes Suva.
New products 2023
Another reason that makes the Citi expert optimistic about Apple is the new products that the iGroup is likely to launch in 2023. It is now firmly assumed on the market that Apple’s eagerly awaited AR/VR headset will finally come onto the market, paving the way for the company to enter the relatively new branch of technology in the metaverse. According to Suva, any announcement by the company in that direction could give Apple stock a tailwind.
Rising iPhone sales
But not only new products should inspire investors. Also increasing sales of the core product iPhone should drive the share certificate. However, this assessment sets Suva apart from the more bearish assessments of other tech analysts: “Investor sentiment in the consumer tech hardware space is very gloomy, and many believe that the strong growth seen overall in iPhones over the past two years (+23% compound annual sales growth rate) is expected to fall sharply as macro-inflationary pressures slow consumer spending.” He, however, disagrees here: “We don’t think that’s the case. In other words, we don’t expect a repeat of FY2016 or FY2019 when revenue was down ~10-15%.” The Citigroup analyst assumes that Apple now has a user base of more than one billion iPhone owners. Citigroup’s own research would also indicate that the rate at which smartphones are being replaced will remain stable and not increase.
Low risk due to integration of other app stores
The news that Apple could soon be forced to allow other app stores on its iPhones and iPads in the EU had led many investors to worry that this could have a negative impact on the sales that the iGroup generated through its own app store. However, Suva believes these fears are overblown: “In our view, there are several factors that may limit the impact of these off-store billing options, including consumer behavior, which we believe tends to be persistent, particularly around the ability to Pay for subscriptions securely and manage them in one place”.
Indian potential
Jim Suva also sees a lot of potential for the iGroup in India. The population here is becoming increasingly wealthy, a trend that is likely to intensify in the future. With increasing prosperity, the spending of Indian households is also likely to increase to around six trillion US dollars by 2030, according to Suva calculations. He goes on to say, “Overall, there is likely to be nearly $2 trillion in additional spending on affordable mid-range offerings, alongside $2 trillion in additional spending led by consumers looking to Switch premium offers or add new consumption categories.”
Apple Services sales up
Last but not least, Suva also sees potential in Apple’s service division in 2023. Apple Services sales fell in 2022 as a result of the weak market environment, but the trend reversal could follow in 2023: “We assume that price increases that implemented in the last quarter will take effect in subsequent quarters and drive revenue growth.”
CFRA analyst also bullish on Apple stock
Suva is not alone in its bullish view of Apple stock. CFRA Research analyst Angelo Zino was also optimistic about the iGroup in the CNBC show “Squawk Box Asia”. In his opinion, Apple only faces risks that could arise from negative news coverage. Zino is alluding to the concerns that are rampant around the tech company as part of the larger corona outbreak in China. After all, the People’s Republic is not only of great importance as an important sales market for Apple, but also in the manufacture of its products. “Ultimately, Apple will do everything it can to defend its business in different geographic regions for as long as possible,” Zino said on the show. He also does not assume that consumers would turn their backs on the iGroup so quickly if there were actually supply bottlenecks, after all people are creatures of habit. And even during the challenging last year, Apple would have done reasonably well alongside Microsoft among tech stocks: “Because from multiple perspectives, they’re much cheaper than some of the other names out there and have the best free cash flow predictability.” He also recommends buying Apple shares.
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