Why Buyers Rewarded Apple However Amazon, Google, Fb Fled After Income

Tim Cook, Chief Executive Officer of Apple Inc. outside the Apple Store on Fifth Avenue in New York, USA on Friday, September 16, 2022.

jeenah moon | Bloomberg | Getty Images

The reasons were different. Meta struggled with shrinking free cash flow as it continued its Metaverse spending spree. Alphabet said ad sales slowed as YouTube reported its first revenue decline. And Microsoft has been pressured by weak forecasts and cloud sales that missed expectations. Amazon missed sales estimates, signaling a weak holiday quarter and falling profits.

But Apple now looks a lot more stable than its peers, especially as fears of a recession are starting to weigh on ad sales and potential holiday spending. That’s largely because Apple relies on hardware and services that people are still buying.

Mac sales, for example, grew 25% year over year. And while iPhone revenue missed estimates, it was still up 9.67% year over year. Services were also up 4.98% year over year despite the lack of analyst estimates.

And Apple has managed to do so while the larger phone and PC industries have seen major declines. According to an estimate this week by research firm Canalys, global smartphone shipments fell 9% in the third quarter, while Apple’s shipments rose 8% despite the pricier devices.

“Demand for premium devices remains intact,” Cowen’s Krish Sankar wrote in a statement on Friday.

In short, Apple’s business remains strong and demand for its products remains high around the world, even in emerging markets, despite the downward trend in other brands’ global smartphone sales.

“Following Apple’s fourth quarter 2022 results, it remains our top pick and, in our view, will likely remain a relatively safe haven for many as the macro environment remains very uncertain and choppy,” said Cross of Credit Suisse. Cross added that Apple’s results showed the company continued to grow in all regions where it sells, despite recent price hikes and weaker consumer sentiment.

Apple’s quasi-guidance was also broadly in line with expectations, compared to companies like Amazon, which indicated a weaker holiday quarter.

Apple CFO Luca Maestri said total revenue grew year over year in December, but at a slower pace than the September quarter’s 8.1% growth.

But the stats still told many analysts that Apple would continue its revenue growth trend, which it has maintained since the pandemic began. Keep in mind that next-quarter growth must depend on a massive $124 billion revenue base from last year’s December quarter.

However, the way Apple is now guiding through data points leaves a lot of room for interpretation, and some analysts believe the current quarter could be worse than the market is pricing in. At least one even thinks Apple’s data point suggests a bearish quarter.

“Apple is essentially saying that revenue will be down next quarter,” Bernstein’s Toni Sacconaghi said on CNBC’s “Squawk Box” on Friday, noting that Apple’s December quarter has an extra week this year.

Sacconaghi said some of Apple’s big-tech peers also seemed to struggle with cost control while Apple remains fairly lean and profitable.

While Apple CEO Tim Cook told analysts that the company is seeing the impact of inflation on its costs, particularly in logistics, it has also coped well with chip supply shortages, saying on Thursday there were no silicon shortages during the quarter.

Apple isn’t immune to the advertising slowdown hitting Meta and Alphabet, though Cook said Thursday that ads make up a very small part of Apple’s services business.

Put it all together and you can see why some analysts view Apple as recession-resistant.

“Overall, our stance remains consistent that Apple remains recession-resistant given its products, services and wearables business,” wrote Piper Sandler’s Harsh Kumar.

– CNBC’s Michael Bloom contributed to this report.

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