Inflation has run rampant in the U.S. during 2022, which has sent interest rates higher, consumers' disposable income tumbling, and investors trimming their exposure to the stock market.
As a result, the Nasdaq-100 technology index has declined by 28% this year, which isn't a hard mark to beat, but Apple (AAPL 1.27%) and Axcelis Technologies (ACLS 1.48%) have done so convincingly.
Apple stock has declined by 17% year to date, outperforming the Nasdaq-100 by 11%. Axcelis Technologies is in the green to the tune of 3%, beating the tech index by a whopping 31%.
Both stocks have positive catalysts working in their favor as we enter the new year, so here's why they could outperform yet again in 2023.
1. The economy could swing back in Apple's favor next year
Apple relies on consumer spending, so this has been one of the most difficult periods for its business in recent memory, yet the company has continued to generate growth. But according to the most recent Consumer Price Index data, inflation may have peaked in June when it reached a 40-year high, because it has been steadily coming down ever since.
If that trend continues, the consumer could be in much better shape at the turn of the new year, meaning Apple's business might be poised for a new phase of growth. The company just released a swath of new products, including the iPhone 14, the Apple Watch Ultra, and the next generation of its popular wireless headphones, AirPods.
These gave Apple's revenue a lift in the recent fourth quarter of fiscal 2022 (ended Sept. 24), capping off its fiscal year on a high note. Q4 smartphone revenue jumped 9.6% year over year, wearables increased 9.8%, and the Mac brand saw 25% growth, all of which marked an acceleration over the third quarter.
Overall, the company generated $394.8 billion in sales for the full year, which represented modest growth of 7.8% compared with fiscal 2021. Its services segment -- which includes Apple Music, Apple Pay, Apple News, and iCloud, to name a few -- grew at a much faster 14.1% clip. That factor is key because Apple's subscription-based revenue carries a higher profit margin than that of its hardware products.
This success sets up a strong first quarter of fiscal 2023, which could be buoyed by a couple of key tailwinds -- an inflation slowdown and the holidays, which is one of the most important periods of the year for any consumer-focused organization. For those reasons, Apple could enter calendar 2023 on the front foot.
There's one final positive that might keep Apple stock buoyed next year, and that's the amount of money the company is returning to shareholders. Apple paid out almost $15 billion in dividends during fiscal 2022. Additionally, it repurchased over $89 billion of its own stock, taking the total to $550 billion since 2013. Investors can expect more of the same in the new year.
2. Axcelis Technologies has the highest order backlog on record
Axcelis Technologies operates in the increasingly important semiconductor sector. The industry continues to grow in both value and scope. According to one estimate, it could be worth over $1.5 trillion per year by 2030. Axcelis doesn't manufacture any chips itself, but rather provides ion implantation equipment to some of the world's largest producers, which is a critical part of the fabrication process.
Its stock shot up and into the green this year after Axcelis reported a series of strong quarterly results, bucking the trend of the broader semiconductor sector. The industry has taken a breather in 2022 as supply has finally caught up with the shortages experienced during the pandemic in 2020 and 2021. That's now suppressing prices, which is hurting the performance of many chipmakers.
But not that of Axcelis. In the recent third quarter (ended Sept. 30), the company revealed it had a $1.1 billion order backlog. That's its highest in history, up from $869 million just one quarter ago.
Its revenue jumped 29% in Q3 to $229 million, but its profitability might be the real story. In the first nine months of 2022, Axcelis delivered $3.75 in earnings per share, which was a whopping 105% increase compared with the same period last year. Plus, like Apple, the company currently has an active stock buyback program worth $100 million to return some of its profits to shareholders.
The strong results have prompted Axcelis to increase its annual sales guidance to $885 million for 2022, up from its original estimate of $850 million at the beginning of this year. It's going to take several quarters to work through its massive order backlog, and considering that's still climbing, it's a safe bet the company will continue to experience strong financial results well into 2023.
Plus, to top things off, despite its stock outperforming the Nasdaq-100 this year, it still trades at a 33% discount to the index on a price-to-earnings multiple basis. All signs point to upside for Axcelis in 2023.
