Consumer electronics giant Apple (AAPL) reported better-than-expected June-quarter results, which gave Apple stock a lift. But after Warren Buffett's Berkshire Hathaway (BRKB) disclosed a massive sale of its Apple stake, many investors might be wondering if AAPL stock is a buy or sell right now.
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Late on Aug. 1, Apple beat expectations for its fiscal third quarter thanks to record services revenue and strong iPad sales. It also guided modestly above views for sales in the current quarter. In the next trading session, Apple stock climbed 0.7% to close at 219.86.
But on Saturday Aug. 3, Berkshire Hathaway revealed that it cut its stake in Apple by 49% in the second quarter. Apple remains a top holding though, with the conglomerate owning $84.2 billion worth of Apple stock as of June 30.
Apple Earnings Report Positive
Cupertino, Calif.-based Apple earned $1.40 a share on sales of $85.8 billion in the quarter ended June 29. Analysts polled by FactSet had expected Apple earnings of $1.34 a share on sales of $84.4 billion. On a year-over-year basis, Apple earnings rose 11% while sales climbed 5%.
In the June quarter, Apple's hardware sales rose 2% year over year to $61.6 billion while services revenue increased 14% to $24.2 billion.
Apple's iPhone revenue dipped nearly 1% to $39.3 billion and accounted for 46% of the company's total sales in fiscal Q3.
Meanwhile, Apple's iPad tablet sales jumped 24% to $7.2 billion thanks to the release of new models. Mac computer sales rose 2% to $7 billion.
Finally, revenue from Apple's wearables, home and accessories unit fell 2% to $8.1 billion.
Apple forecast fiscal Q4 revenue growth of about 5%, vs. the consensus estimate of 4.4%.
Apple Stock Largest By Market Cap
On July 9, Apple became the first company to close regular-session trading at a market value above $3.5 trillion. But it ended Friday with a market capitalization of $3.34 trillion.
Apple became the world's most valuable company thanks to enthusiasm over its plans to add artificial intelligence to its products.
Apple revealed its strategy for AI at its Worldwide Developers Conference on June 10. Its approach to AI, branded Apple Intelligence, involves both on-device and data-center processing with a focus on privacy and security. It will use its own AI models and third-party models, starting with OpenAI's ChatGPT.
Apple's AI services will be available starting this fall, but only for the current iPhone 15 Pro model handsets and Macs and iPads with the M1 processor or newer chips. AI also will be embedded in the upcoming iPhone 16 handsets and other new hardware.
The centerpiece of Apple's AI strategy is a revamped Siri digital assistant, which responds to voice and text prompts. With AI smarts, Siri will be able to work across apps and retrieve information from messages, emails, calendar, photos and other apps. It also can summarize emails and webpages and transcribe calls. Plus, it can generate custom emoji and other images.
Apple stock staged a breakout on the WWDC news.
Apple iPhone Upgrade Cycle Forecast
Some Wall Street analysts think AI capabilities will drive an upgrade cycle for iPhones, starting with the iPhone 16 series this fall.
Evercore ISI analyst Amit Daryanani said the upgrade cycle for AI iPhones will be "stronger for longer." That's because Apple is doing a staggered rollout of AI features for the iPhone, he said.
However, other Apple stock analysts are skeptical about the impact of AI. Consumers will need to see some killer apps for artificial intelligence before committing to buy new smartphones, they said.
But many iPhone handsets already are overdue for an upgrade.
Wedbush Securities analyst Daniel Ives estimates that 270 million iPhones out of the 1.5 billion worldwide installed base have not been upgraded in more than four years.
Meanwhile, LightShed Partners analyst Walter Piecyk said Apple's plan to add satellite connectivity to its iMessage app this fall has been an underappreciated factor that could spur iPhone sales. Satellite links could be a bigger factor to drive upgrades than AI, he said.
Apple's List Of Woes
Meanwhile, several issues are weighing on Apple stock including weak iPhone sales in China and the U.S. and legal problems over its App Store policies in Europe.
On June 24, European Union regulators accused Apple of violating the EU's Digital Markets Act with its App Store policies.
Plus, Apple faces an antitrust lawsuit by the U.S. Department of Justice. On March 21, the Justice Department sued Apple, accusing the company of violating antitrust laws with its restrictive iPhone and App Store policies. The lawsuit alleges that Apple's conduct makes it harder for Americans to switch smartphones, undermines innovation for apps, and imposes extraordinary costs on developers, businesses and consumers.
In a statement, Apple said the lawsuit is "wrong on the facts and the law" and vowed to "vigorously defend against it."
Wall Street analysts said the case will be a headline risk for Apple stock. But the lawsuit could take three or four years to wind its way through the legal system.
Meanwhile, in late February, Apple decided to end development of an autonomous electric car after a decade of work. Apple reportedly spent more than $10 billion on the Apple car project before shutting it down to focus on AI.
Apple Opportunities For Growth
With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.
Recently, two businesses have given Apple's sales and profits a boost: services and wearables.
Apple's services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.
On Oct. 25, Apple raised prices for multiple subscription services, including Apple TV+ and its Apple One bundles.
However, Apple is facing antitrust scrutiny in the U.S., Europe and Asia for its App Store policies, including its 30% commission fee. In Europe, Apple must comply with the recently enacted Digital Markets Act.
Apple Vision Pro Hits The Market
Meanwhile, Apple launched its first major new product in nine years on Feb. 2 with Apple Vision Pro. The spatial computing headset starts at $3,499. It is available in the U.S., Canada, U.K., France, Germany, Australia, Japan, Singapore, China mainland and Hong Kong.
Apple Vision Pro is part of Apple's push into the wearables market, following the success of the Apple Watch and AirPods wireless earbuds.
Apple unveiled Vision Pro in June 2023 at its Worldwide Developers Conference. But Apple stock fell 0.8% after the announcement. Critics on social media derided the new product as "nerd goggles."
While the technology is impressive, the high price will limit sales to well-heeled early adopters, analysts said.
The computer goggles combine virtual and augmented reality. The headset can play virtual-reality content and simulate augmented reality using video pass-through to show the real world. It is designed for entertainment, communications and productivity applications.
Apple's Storied History
Apple has been an American success story several times over. First, it ignited the personal computer revolution in the 1970s with the Apple II. Then it reinvented the PC in the 1980s with the Macintosh.
Co-founder Steve Jobs returned to run Apple in 1997 and oversaw a winning streak of innovations that included the iMac, iPod, iTunes, iPhone, iPad and the App Store.
The biggest driver of Apple's modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.
Apple has an installed base of more than 2.2 billion devices in use today, including about 1.5 billion iPhones.
Exclusive Apple Stock Ratings
AAPL stock has an IBD Relative Strength Rating of 87 out of 99. The Relative Strength Rating shows how a stock's price performance stacks up against all other stocks over the last 52 weeks.
Apple stock has an IBD Composite Rating of 90 out of 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings of fundamental and technical performance into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
AAPL Stock Technical Analysis
Apple is one of the Magnificent Seven stocks, which fueled the big stock market rally in 2023.
Last year, Apple stock climbed 48.2% to 192.53. Year to date through the Aug. 2 close, Apple stock is up 14.2%.
On June 11, Apple stock broke out of a cup base at a buy point of 199.62, according to IBD MarketSurge charts. It hit a record high of 237.23 on July 15 before pulling back.
Is Apple Stock A Buy Right Now?
No, Apple stock is not a buy right now. It is extended beyond the 5% buy zone of its recent breakout. The buy zone ran to 209.60.
Also, the broader market has fallen into correction so investors shouldn't be taking new positions.
Apple stock needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD's Big Picture column for the current market direction.
Keep an eye on the overall stock market. If the market turns south, don't try to fight the general stock market direction.
To find the best stocks to buy and watch, check out IBD's Stock Lists page. More stock ideas can be found on IBD'sLeaderboard, MarketSurge and SwingTrader platforms.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitzfor more stories on consumer technology, software and semiconductor stocks.
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