Looking for a consumer-friendly tech stock with a strong presence internationally to protect your portfolio against a U.S. downturn?
Apple
might fit the bill.
U.S. consumers might be more cautious about buying iPhones as fears of a recession mount but customers in China and India are still looking to upgrade their phones. That makes
Apple
(ticker: AAPL) a likely winner even amid a darkening macroeconomic environment, analysts said.
Apple’s second-quarter earnings beat was powered by iPhone sales. Analysts at KeyBanc Capital Markets highlighted accelerating growth in China and across global emerging markets as a key reason to be positive that can continue, despite lower-than-expected U.S. sales.
“With records being set on the installed base of active devices across all geographies and all product categories, we believe investors are likely to continue to look past the noise of quarterly results as Apple is likely more resilient to macro than it has ever been,” wrote KeyBanc analysts led by Brandon Nispel.
KeyBanc raised its target price on Apple stock to $180 from $177 and reiterated its Overweight rating.
If China is the current standout market for Apple, then analysts are hoping it will replicate that success in India. After opening its first Indian stores earlier this year, Apple is now planning a bigger push into a market dominated by Chinese brands.
“We continue to expect [Apple] to mirror its strategy for China for India (from a supply chain and consumer sales standpoint), only we believe it will take a long time for it to generate 5%-10% of its sales from the country,” D.A. Davidson analyst Tom Forte wrote in a research note.
D.A. Davidson increased its target price on Apple to $193 from $173 and reiterated a Buy rating on the stock, citing increased near-term profitability forecasts.
Apple shares were up 2.4% in premarket trading to $169.70 on Friday. The stock has risen 28% this year so far.
Apple currently trades on a multiple of around 26 times its forecast earnings for the next 12 months, according to FactSet, above its five-year average of around 22 times. That’s despite a Wall Street consensus that its sales for this fiscal year likely will fall slightly. However, analysts are still backing it to defy concerns about a cyclical downturn in consumer spending.
Analysts at Evercore ISI reiterated an Overweight rating on Apple stock. They wrote that the company’s results showed “the ‘consumer staple’ nature of iPhones vs. investor perception of iPhones as a discretionary technology product” as they kept a $190 target price on the shares.
Write to Adam Clark at adam.clark@barrons.com
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