Apple: Buy opportunity as the stock has now entered a bear market?

  • Apple has lost more than 20% since its peak in January.
  • It is used to weathering economic downturns.
  • Apple’s treasury provides another strong support
  • If you want to improve your search for new investment ideas, check out InvestingPro+.

The most valuable company in the United States, Apple (NASDAQ:), has just entered bear market territory, sending investors a strong signal that the current rout may still have some leeway.

Once considered one of the safest bets in times of crisis, the iPhone maker has lost more than 19% since its peak in early January. Apple closed Thursday at $142.56.

The Cupertino, Calif. behemoth also lost its status as the world’s most valuable company. On Thursday, Saudi Aramco (TADAWUL:) traded near its all-time high, with a market capitalization of around $2.43 trillion, overtaking Apple for the first time since 2020.

No one knows how long this selloff will continue, but there’s good reason to believe that Apple shares will bounce back from this correction.

Investors view Apple as a safe haven because of its large global market share in the cellphone market, its long-term profitability and its strong balance sheet. The current market turmoil does not indicate that Apple’s lead in these areas is in jeopardy.

Year-to-date, Apple is down about 19%, while the index is down more than 27%. Hint. Microsoft (NASDAQ:), the second largest stock, with a market capitalization of $1.99 trillion, is down 24% this year.

Record quarterly profit

Apple is also a very profitable company. Its gross margin, which hovered around 38% before the pandemic, is now above 43%, thanks to the reorientation of its turnover towards high-end products that generate better margins, such as its new iPhone models equipped with 5G capabilities.

The company had $97.3 billion in sales last month for the period ending March 31, which is a record high for a non-holiday quarter. The December quarter was a period of bumper sales, beating Wall Street estimates with record sales of nearly $124 billion.

Apple’s hoarding of cash offers another solid reason for investors looking to take refuge in today’s uncertain times. With the world’s largest company’s cash reserves of more than $200 billion, the company has enough firepower to back its stock through share buybacks.

Investors like buyback programs because they help reduce a company’s stock count and increase profits, especially in turbulent times like the one we’re going through now.

Warren Buffett, whose investment firm is a major shareholder in Apple, has benefited enormously from this trend. Buffett has built up a $159 billion stake in Apple since his company Berkshire Hathaway (NYSE:) began buying the stock in late 2016.

Buffett told CNBC this month that he bought $600 million worth of Apple stock following the stock’s three-day decline last quarter. Apple is the conglomerate’s largest holding, worth $159.1 billion at the end of March, and accounts for about 40% of its stock portfolio.

Due to the stock’s strong long-term appeal, most of the 45 analysts polled by Investing.com recommend buying Apple stock, with their consensus 12-month price target implying 33% upside potential .

AAPL Analyst Consensus

AAPL Analyst Consensus

Source : Investing.com

Conclusion: Is Apple stock a buying opportunity?

It’s hard to predict when the current bearish period will end for Apple and other tech mega-caps. But this weakness is an opportunity for long-term investors, who buy and hold, to build a position in Apple, which should rebound strongly, thanks to its solid share buyback plan, as iPhone sales resume and its impressive margins.

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