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As one of the top consumer technology companies in the world, Apple (NASDAQ:AAPL) faces a distinct conundrum. Being a mature and established enterprise lends Apple to criticism that it’s boring. At the same time, pressure on the consumer economy implies a loss of relevance. Still, the company commands massive pricing power, making it a worthwhile investment to consider. I am bullish on AAPL stock for its resilience under pressure.
Breaking Down AAPL’s Recent Results
For starters, Apple’s most recent earnings print for its fourth quarter of Fiscal 2023 provided a confidence boost for investors. Heading into the report, confidence was generally high. However, analysts pointed to concerns about weakness in the company’s hardware sales. That’s not surprising, given global demand worries – particularly in China – as well as supply constraint issues. Still, Apple delivered the goods like it usually does.
As TipRanks contributor Abdulrasaq Ariwoola reported, earnings per share landed at $1.46, beating the consensus target of $1.39 per share. On the top line, sales did happen to decrease 0.7% on a year-over-year basis to $89.46 billion. Nevertheless, this tally slightly exceeded analysts’ expectations, which called for $89.28 billion.
As for the hardware components, Apple’s iPhone sales rang up $43.81 billion, in line with Wall Street’s projections. In addition, this print represented a 2% lift from the year-ago quarter’s tally. Similarly, iPad revenue enjoyed an encouraging performance, reaching $6.44 billion, which beat the consensus view of $6.07 billion.
In fairness, it wasn’t all positive for AAPL stock. Sales related to Apple’s Mac computers slipped, coming out to $7.61 billion against an expected $8.63 billion. Further, to Ariwoola’s point, shares initially fell in after-hours trading following the earnings disclosure.
That could be due to options market dynamics. Both before and after the disclosure, options flow data showed bearish trades – both bought puts and sold calls – that may have impacted sentiment. Still, it appears that the power of the fundamentals has taken over the narrative.
Gross Margin Trend Confirms Apple’s Pricing Power
As impressive as the Fiscal Q4 print was for Apple, what could really drive AAPL stock higher for the long haul could be its pricing power. To be clear, no company is completely immune from outside pressures. For example, inflation remains stubbornly high. If the Federal Reserve wants to take the gloves off with aggressively higher interest rates, that could roil the economy.
Nevertheless, the company’s gross margin continues to march higher despite obvious headwinds impacting the consumer economy. In Fiscal Q4, Apple posted a gross margin of 45.2%. In the year-ago quarter, this metric sat at 42.3%. This is a strong indicator that, irrespective of increased prices, consumers will continue to buy Apple products. That bodes very well for AAPL stock.