Nasdaq AAPL Apple

The supply shortages, macro headwinds, and resurgence of the coronavirus in China weighed on the shares of the big tech companies. Notably, shares of Apple, Amazon, and Alphabet are down about 27%, 38%, and 27%, respectively, on a year-to-date basis. 

While these large tech stocks have witnessed a pullback, rate hikes and fear of recession add uncertainty to their future trajectory. Amid the uncertainty, let’s look at what TipRanks’ proprietary tools and analysts’ recommendations reveal about the future of these big tech companies. 

Apple (NASDAQ: AAPL)

Apple continues to benefit from the ongoing demand for its products. However, management warned that supply constraints and industry-wide silicon shortages could have a negative impact of $4 billion to $8 billion on its top line in Q3. Meanwhile, COVID-led challenges in China and adverse currency movement could remain a drag. 

While Apple faces short-term headwinds, its stock has received 21 Buy and six Hold recommendations. Moreover, the average Apple price target of $186.33 indicates 43.4% upside potential over the next 12 months. New product launches and Apple’s faster M2 chip could support its growth. 

Looking at hedge fund activity, Bridgewater Associates’ Ray Dalio, Caxton Associates’ Andrew Law, and Hirtle Callaghan & Co’s Ranji H. Nagaswami increased their holdings in AAPL stock in the last quarter. Apple stock also has positive indicators from TipRanks’ investors and bloggers. Overall, AAPL stock has an Outperform Smart Score of 9 out of 10.

Amazon (NASDAQ: AMZN)

The slowdown in e-commerce growth, inflationary cost pressure, and the weak near-term outlook are why Amazon stock is down. However, its solid competitive positioning in the cloud and e-commerce market keeps analysts bullish. 

AMZN stock has received 36 Buy, one Hold, and one Sell recommendations for a Strong Buy consensus rating. Further, the average Amazon price target of $178.66 implies 72.4% upside potential. 

TipRanks’ Hedge Fund Activity tool for AMZN shows that several hedge fund managers, including First Pacific Advisors’ Richard Atwood, have increased their holdings in AMZN stock. It’s worth noting that TipRanks’ investors are also optimistic about AMZN stock, and 8% of these investors have raised their holding in one month. All in all, AMZN stock has an Outperform Smart Score of 8 out of 10.

Alphabet (NASDAQ: GOOGL)

Macro challenges, adverse currency fluctuations, tough year-over-year comparisons, and pressure on YouTube’s ad growth took a toll on Alphabet stock. However, strength in cloud and network advertising augurs well for growth. 

GOOGL stock sports a Strong Buy consensus rating on TipRanks, based on 30 unanimous buy recommendations. Moreover, the average Alphabet price target of $3,212.72 implies 51.6% upside potential. 

Looking at hedge fund activity, Bridgewater Associates’ Ray Dalio, Chilton Investment Co’s Richard Chilton, and several other hedge fund managers have increased their holdings in GOOGL stock. Furthermore, GOOGL stock also has positive indicators from TipRanks’ investors and bloggers. GOOGL stock has an Outperform Smart Score of 9 out of 10.

Bottom Line 

While these big tech companies face near-term headwinds, the positive indicators from analysts, hedge fund managers, financial bloggers, and TipRanks’ investors point to a healthy future ahead. 

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French Finance Minister Bruno Le Maire said he would try to convince sceptical nations to agree on a corporate tax deal at a meeting in Luxembourg on Friday, but he acknowledged that reaching an agreement was "very difficult".

Taiwan's export orders likely returned to growth in May after experiencing their first fall in two years in the previous month, a Reuters poll showed on Friday, helped by demand for technology products and easing COVID-19 lockdowns in China.

In a topsy-turvy market for tech stocks, Apple (AAPL) shares are down with the rest of the growth stocks this year (down ~27% since 2022 began).

However, according to J.P. Morgan analyst Samik Chatterjee, Apple is poised to outperform the market over the next 12 months -- to not only regain its highs of earlier this year, but to surpass them, and rise as high as $200 a share -- 54% more than Apple stock costs today.

Chatterjee laid out his thoughts on this score on Thursday, in a note on the subject of advertising spend and mobile ad growth at Apple. As the analyst writes: "Global advertisement spends are increasingly moving towards digital mediums, and mobile advertisement is expected to grow from $288 bn in 2021 to over $400 bn by 2024." Not all this money will go to Apple, of course. But with an installed base of more than one billion iPhone users worldwide, and generally well-heeled, Western consumer-users residing in the United States and Europe to boot -- the kind advertisers love to target -- Chatterjee argues that Apple is "better positioned than most other companies to benefit from this secular trend" of mobile advertising growth.

Currently, explains Chatterjee, Apple's advertising efforts are limited to selling no more than "one ad per search in the App Store." But this is only the beginning of what's available to Apple. There's at least the potential, argues the analyst, for Apple to take advantage of its huge installed base of iPhones by targeting ads on its own applications, as well as third-party applications, and managing the delivery of these ads for its clients.

How big is this opportunity for Apple? It could be worth as much as $6 billion in incremental revenue by 2025, says the analyst, and once Apple starts down this road, Chatterjee believes the company could grow its advertising revenues "at a robust double-digit pace" in years past 2025.

Now consider those numbers for a moment: A $400 billion market opportunity -- and Apple only claiming $6 billion of it -- works out to a projection of a mere 1.5% of total global mobile advertising market share. This is not any kind of wild, far-fetched claim that Chatterjee is making. It's actually both realistic and possibly even conservative, should Apple decide to capitalize upon its potential.

In the near term, Chatterjee continues to expect Apple to be content with mid-to-upper single digit revenue growth from now through 2024 (with earnings growing a bit faster than that -- 8% to 10%). But over the longer term, Chatterjee believes that the likely growth in advertising revenue will help to support 10% overall long-term annual revenue growth at Apple -- and presumably, even faster profits growth. (See AAPL stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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Apple (AAPL) stock has sagged lower alongside the rest of the market amid a renewed fear of rate hikes, inflation, and a coming economic slowdown. While the macro picture has gotten a lot weaker in recent months, one can't help but notice that Apple has pulled the curtain on many disruptive innovations.

Some of these innovations are more than just intriguing concepts. They're potential cash cows that could fuel the next leg of earnings growth.

Even if the U.S. economy is bound to fall into a recession in 2023, Apple has a lot of catalysts up its sleeves that could offset economic pressures on the horizon. Simply put, Apple is innovating at a rapid pace, and it's this innovation that will help the firm make a huge splash in the fintech and enterprise segments.

Indeed, Apple has recognized where there's economic profit to be had. With such powerful network effects on its side, Apple can out-innovate rivals in an efficient manner. Now, Apple may not be a first-mover, but it is a firm that knows how to reinvent things remarkably well.

Apple's Hardware, Software, and Services Businesses Could Offset Recessionary Headwinds

As the company doubles down on financial services, with Apple Pay Later (or Pay in Four), Apple Tap to Pay, and even a possible hardware subscription service, we could witness the next era of the company's Services push.

Under CEO Tim Cook, Apple is fully-focused on delivering the best hardware, software, and services. It's the Services segment that's shined and what could be key to Apple's next round of multiple expansion.

As Services growth ramps up, hardware and software are not about to slow down.

On the hardware front, the big mixed-reality headset could be as little as a year away from launch. The exciting project, which has been years under development, was recently demoed to the board.

WWDC 2022 also showcased amazing new innovations on the software front, with iOS 16 and macOS Ventura. Also, unveiling its M2 chip and a redesign on its Macbook Air. Indeed, Apple is not slowing down.

As Apple puts the finishing touches on its headset, in what could represent the biggest hardware innovation since iPhone, it could prove hard to keep Apple stock in the $130-140 range through 2023.

There are a lot of services, software, and hardware catalysts to look forward to over the medium term with Apple. For that reason, I remain bullish on the stock, even as it continues following broader markets to multi-year lows.

Also worth noting, on TipRanks, AAPL stock receives a Smart Score rating of 9 out of 10, indicating that there is high potential for the stock to outperform the broader market.

Waiting on That Apple VR Headset

Aside from jaw-dropping "One More Thing" new product reveals, Apple's hardware and software innovations have been quite iterative in recent years. They haven't been able to garner as much excitement as the Apple of old.

Looking ahead, Apple's headset is something to get excited about. Still, global supply-chain issues could delay the launch date further. Many expect the VR/AR headset will be unveiled in early 2023.

Given that nothing official has been announced, and future COVID-19 supply disruptions could be in the cards, don't be so surprised to see the headset moved out to mid-to-late 2023. As challenges in the supply chain are ironed out, Apple is sure to polish its headset such that it stands out relative to the likes of what currently exists on the market today.

Beyond the headset, Apple Car rumors are still out there. Still, such a nascent product may be more than five years away.

In the meantime, Apple investors need other catalysts to get excited about. With the recent services unveiled, I think the company has a lot of new profit drivers that can keep earnings moving higher.

Apple Isn't Done Innovating in Services

Apple's Services push has been rewarded with a valuation multiple expansion over the years. As Apple pushes deeper into fintech while improving its footing in Enterprise Services, the company essentially has its foot in the door of new lucrative markets.

The company has its disruptor hat on and could evolve to become a leader in financial technology and pressure incumbent fintech firms well after this market sell-off concludes.

Further, the enterprise business may also give Apple's Services segment a nice jolt. As the company beckons in corporate customers with its M-series hardware and Apple Business Essentials IT service, the enterprise space appears to be a field ripe for disruption.

Given that the Mac is distancing itself from PCs with its incredible M-series chips and better integration with other hardware offerings, Apple seems to have set the stage to make a big move into the enterprise business. Indeed, Apple may be viewed as a consumer products company, but it's not afraid to explore new realms.

Wall Street's Take

Turning to Wall Street, AAPL stock comes in as a Strong Buy. Out of 27 analyst ratings, there are 21 Buy recommendations and six Hold recommendations.

The average Apple price target is $186.33, implying upside potential of 37.7%. Analyst price targets range from a low of $157.00 per share to a high of $210.00 per share.

The Bottom Line on Apple

Apple is the original disruptor and is not about to slow down, even as the economy does. If anything, Apple is setting itself up to take share as times get tough with software, hardware, and services innovations.

Sure, the market has soured on Apple recently, but with so many medium-term catalysts, it's hard to be a seller here.

Disclosure

Britons cancelled over 1 million music subscriptions in the first quarter as a worsening cost of living crisis forced them to make savings, industry data showed on Thursday.

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