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Is Apple a FAANG Stock to Buy on Weakness?

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FAANG stocks like Apple (NASDAQ:AAPL) have had a tough time so far this year. A rising interest rate environment has put pressure on them. In the case of some FAANG stocks, they’ve been “de-fanged” due to earnings misses. Yet in the case of AAPL stock, while it’s been affected by market conditions, I wouldn’t say it’s been “de-fanged.”

In fact, its most recent quarterly earnings came in ahead of expectations. That’s not to say, however, that the tech giant isn’t facing its own set of near-term challenges. In the coming quarters, continuing issues like the supply chain crisis could affect its operating performance. In turn, limiting its short-term rebound potential.

On a longer timeframe, though, it stands to keep on delivering steady growth. Even at a more modest pace. With this in mind, investors interested in making this a long-term position may want to consider buying at today’s prices.

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AAPL

Apple

$$145.56

The Situation Today With AAPL Stock

As mentioned, both above and in past coverage, FAANG stocks have been under pressure alongside tech stocks in general. Chalk this up to rising interest rates, and rising fears that higher interest rates will cause a recession.

But unlike some of its peers, Apple does have one thing going for it. The company’s near-term prospects hinge far less on the health of the digital advertising market. Other tech giants, generating more of their revenue from advertising, may be at risk of further disappointing investors in the quarters ahead.

Again, that doesn’t mean this FAANG component faces zero challenges in today’s economic environment. Nor does it necessarily mean AAPL stock will thrive while its peers continue to flounder. An economic slowdown would obviously have an impact on demand for the iPhone maker’s offering.

If this headwind emerges, it will be atop a headwind it’s already facing: the supply chain crisis. The crisis cost the company $6 billion in lost revenue last quarter. Even as it was able to beat on earnings, the continued disruptions could affect results this quarter, and through the rest of 2022. This, coupled with more market volatility, may limit its ability to bounce back.

Taking The Long-Term View

Given external and company-specific factors, don’t expect a quick rebound for AAPL stock. Its trip from current prices back to its all-time high ($145.56 per share) could take much longer than its slide from its highs down to today’s prices.

This may leave short-term traders looking elsewhere for opportunity, but if you are more the “buy and hold” type? This may still be a name to consider. Generating hundreds of billions in revenue per year, earnings above the $100 billion mark, and with a market capitalization measured in trillions, it’s safe to say that Apple has largely maxed out its ability to grow at a high clip.

Especially as the pandemic likely pulled forward a lot of its future growth. From here, increases in its revenue and earnings will likely arrive at a more modest pace. Still, modest growth is better than zero growth.

Furthermore, it’s this growth, whether from faster-growing segments like its Services unit, or from its move into new areas, like AR/VR headsets and electric vehicles, that give it a strong chance of re-hitting its past high, and hitting new highs, in the years ahead. This potential outweighs any issues playing out at present.

The Verdict

Currently, this stock earns a “B” rating in my Portfolio Grader. It may be best to approach it as a long-term play. Even as there are catalysts, such as upcoming product releases, that stand to give it a boost.

A long term approach is what Warren Buffett is taking, with Berkshire Hathaway’s (NYSE:BRK-A,NYSE:BRK-B) investment in Apple stock. It’s been a large Berkshire holding for years, but Buffett has taken advantage of the FAANG stock pullback. His firm last quarter bought an additional $600 million worth of shares.

This comes as no surprise, Apple is a “wonderful business at a fair price,” as the popular Buffett adage goes. A 24.3x earnings multiple is more than fair, given its long-term prospects.

Once it gets over today’s challenges, and earnings continue to grow at a satisfactory pace, AAPL stock could re-hit its past high, and make new highs.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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