Could Apple Stock Be in for a Bumpy Ride Later in 2022?

By Benzinga
Benzinga
Benzinga
January 31, 2022 Updated: January 31, 2022

Apple Inc reported strong first-quarter results last week and expectations for continued outperformance are running high.

But an analyst at Credit Suisse is bracing for a more muted performance in the current calendar year and here’s why.

The Apple Analyst

Credit Suisse analyst Sami Badri maintained a Neutral rating on Apple shares and increased the price target from $150 to $168.

The Apple Thesis

After forecast-beating December quarter results, Apple’s management held off from giving explicit guidance but hinted at solid year-over-year growth in the March quarter, analyst Badri said in a note.

Apple’s fiscal-year second-quarter revenue is likely to set a March quarter record despite supply constraints, the analyst said. However, the growth should decelerate due to tough comparisons, he added. The latest iteration of the iPhone was released in the September quarter in 2021 as opposed to the December quarter in 2020 and the current quarter is expected to experience a three-point forex headwind, the analyst explained.

The Services business set all-time records for Cloud Services, Music, Video, Advertising, and Payment Services and was robust across all geographies in the December quarter, Badri noted. The number of paid accounts in its digital content stores grew by double-digits, with paid subscribers across the Services platform reaching 785 million, the analyst said.

The analyst expects the Services business to grow in double-digits in the March quarter but sees a deceleration due to difficult comparison against the year-ago quarter, which benefited from elevated lockdowns that stimulated digital services usage.

Margins shined in the December quarter, but should be less impressive in 2022, the analyst said. The calendar year 2022 EBITDA margins are expected to see a year-over-year drop on tough comps and higher R&D, he added.

Summing it up, iPhone and Services are not set up to see a stellar performance in the calendar year 2022, given unfavorable iPhone upgrade cycles and tough comps, respectively, Badri said.

By Shanti Rexaline

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