Apple Earnings Surpasses Expectations, Stock Predicted To New Hights

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Apple stock has defied expectations and surged into record highs, effectively confirming a decisive breakout that could set the stage for unprecedented growth into 2024. The stock was trading at $187 on a recent Friday afternoon, breaking its previous resistance level of $183 for two weeks consecutively, an indication that seems to confirm a decisive breakout.

This bullish trajectory has sparked a new price objective for Apple, with a potential 37% upside from the current levels, setting a target price of $254 per share. This projection puts the tech giant's market valuation on track for a staggering $4 trillion, given the company's current outstanding shares standing at 15.79 billion.

As explained by Katie Stockton, founder of Fairlead Strategies, the breakout paves the way for a measured move to $254, using the Covid/2020 corrective low as a reference point. This 'measured move' concept rests on the assumption that the uptrend that characterized the 2021-2022 trading range has resumed. According to Stockton, Apple's technical price objective is expected to materialize by the end of 2024, with the stock's uptrend looking poised for continuity in the short term.

Investors can hardly overlook the fact that Apple's stock has surged by an impressive 44% in 2023, driving the bulk of the S&P 500's year-to-date gain of about 14%. Much of this growth can be attributed to the company's innovative approach to expanding its product portfolio. This was particularly evident in the recent announcement of its first product in the AR/VR market, the Apple Vision headset, priced at $3,499 and set for release early next year.

Apple's dominance in the tech industry continues to be affirmed by its remarkable valuation, currently standing at around $2.96 trillion. The company is set to cross the coveted $3 trillion threshold if the stock price hits $190.73, a figure just over $3 away from its current levels. This would further consolidate its position as the world's most valuable business with a market cap of $2.9 trillion.

The iPhone continues to be Apple's crown jewel, accounting for 54% of the company's total revenue in the fiscal 2023 second quarter, which ended on March 31. All hardware contributes to 78% of the company's total sales. However, the company's Services segment is emerging as an area of interest for shareholders, featuring products like Apple Pay, Apple TV+, and Apple Music. Last quarter, revenue in this division increased by 5% year-over-year, outpacing the overall business growth. With the superb gross margin of 71% that this segment carries, the continual growth should considerably lift profits.

Apple shares have seen a commendable growth over the past five years, with a 302% increase. This performance easily trumps the Nasdaq Composite Index's 76% return. However, considering the superior performance, Apple's stock isn't necessarily cheap, trading at a price-to-earnings (P/E) ratio of 32. But the dominance of Apple in the global market and the high demand for its products and services make investors willing to pay a premium valuation for the tech giant.

Warren Buffett's investment firm, Berkshire Hathaway, exemplifies this investor sentiment. Its $354 billion investment portfolio underscores Buffett's proclivity to invest a substantial portion of his company's capital in top-performing businesses. In this context, Apple seems to command significant attention from Buffett and his team. As of the closing bell on June 16, 2023, Berkshire Hathaway owned 915,560,382 shares of Apple stock, equivalent to a market value of $169.3 billion. This stake accounts for 47.8% of Berkshire's investment portfolio, almost 40 percentage points higher than its second-largest holding, Bank of America, at 8.5%.

Buffett and his team have turned an estimated $36.3 billion investment into $169.3 billion in seven years, excluding dividends paid. This remarkable return on investment is attributed to Apple's exceptional performance. During Berkshire's annual meeting, Buffett expressed high praise for Apple, referring to the tech giant as "a better business than any we own."

The attraction Buffett has towards Apple can be attributed to four main factors. Firstly, Apple's customer base and brand are extremely valuable. Consistently ranked as the world's most valuable brand, Apple boasts exceptional customer loyalty. Secondly, Apple's robust management team led by CEO Tim Cook is a testament to its sustained market dominance, especially in the U.S. smartphone market, and its successful evolution into a services provider. Thirdly, Apple's relentless innovation and evolving product line have piqued Buffett's interest. The final factor is Apple's efficient capital-return programs. The company has repurchased $586 billion worth of its common stock over the past decade, a move that Warren Buffett deeply appreciates.

The company recently saw its stock hit an all-time high of $187.56 before settling at $186.68 for the session. This upward trend sets Apple's market cap at $2.936 trillion, and with predictions of reaching the $3 trillion mark shortly, analysts project the company could tack on another $1 trillion by the end of 2024.

A significant development in Apple's corporate strategy is its partnership with Unity to provide content. Unity's platform, known for creating lifelike animations with applications in gaming and industry, will be instrumental in shaping Apple's next phase of growth. Despite its potential, Unity did not issue a press release discussing the Apple partnership, suggesting that the agreement might not be as significant as it appears.

Apple's financial health remains robust, as evidenced by its recent quarterly and annual revenue history. For the quarter ending March 31, 2023, Apple generated $94.836 billion, marking a 2.51% decline year-over-year. Despite this slight dip, the annual revenue for 2022 stood at $394.328 billion, a 7.79% increase from 2021.

Furthermore, Apple's gross profit for the quarter ending March 31, 2023, was $41.976 billion, a minor 1.37% decline year-over-year. However, the annual gross profit for 2022 saw an 11.74% increase from 2021, reaching $170.782 billion.

While these figures showcase Apple's financial resilience, they also reflect the stock's historical performance. On June 23, 2023, Apple's closing stock price was $186.68, with an all-time high of $187.00 recorded the previous day. The stock's 52-week high and low stand at $187.56 and $124.17, respectively. The average Apple stock price for the last 52 weeks is $154.44, clearly underscoring the tech giant's continued ascendancy in the financial markets.
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