Widely followed Wall Street analyst Toni Sacconaghi put out a new report on Apple (AAPL +2.65%) on Monday. The Bernstein analyst had recommended investors just hold shares in the iPhone maker. Now, ahead of its quarterly earnings report expected later this week, Sacconaghi says it's time to buy Apple stock.
The analyst's "outperform" rating comes with a price target of $195 for Apple. That's a gain of nearly 15% over the next 12 months from Tuesday's closing price.
What's ahead for Apple
Apple hasn't been a standout among technology stocks this year. Shares are down nearly 12% year to date. That has come about as investors fear growth is slowing and interest in its latest iPhone offering has been lackluster.
NASDAQ: AAPL
Key Data Points
But the Bernstein analyst says that's exactly why investors should now "buy the fear" in Apple. Sacconaghi thinks weakness in the large Chinese market is just part of the product cycle and is not structural in nature. And that fear has also led to low expectations from Apple with its fiscal second-quarter results due to be reported on Thursday, May 2.
But investors shouldn't worry about whether Apple stock pops or drops when it reports quarterly earnings. The stock should be owned based on its financial and business fundamentals. One reason is that regardless of the short-term stock movement, investors will be rewarded with a dividend payment. Other popular big tech companies Meta Platforms and Alphabet recently initiated dividends. But Apple has been paying shareholders over the past decade. And with more than $170 billion in cash and equivalents on its balance sheet as of Dec. 30, 2023, there's little danger of a cut in the dividend.
Even if the stock drops after earnings, the long-term picture still looks bright. Apple will inevitably continue to release new products and services. Regarding product offerings, Sacconaghi and his team also noted that "replacement cycle tailwinds and incremental generative AI (artificial intelligence) features set up Apple well for a strong iPhone 16 cycle." That'd be more good news for investors.
