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The Ratings Game: After blowout earnings, beaten-down Apple shares are ripe for the picking, say analysts

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The pullback in Apple shares since the start of the year is offering up a golden opportunity for investors to get some exposure to the tech giant, after a blowout set of results.

That’s according to KeyBanc Capital Markets analysts Brandon Nispel and Evan Young, after the tech giant AAPL, -0.29% posted record fiscal first-quarter sales of $123.95 billion, and record earnings of $34.63 billion, which surpassed the $30 billion mark for the first time.

Muscling past a pandemic and supply-chain woes, Apple made just enough optimistic noises about the current quarter to keep Wall Street satisfied.

“Mac and iPhone drove upside to Products revenue; 785m paid subscriptions drove Services growth and margin upside. F2Q22 guidance was above consensus, and importantly, the active base of installed devices grew at a healthy 9% rate,” said the analysts in a note to clients. keeping their overweight rating and $191 price target.

Apple shares were up close to 4% in premarket trading on Friday, but a tech-fueled selloff for Wall Street so far this year has driven a 10% drop in shares of the iPhone maker.

Nispel and Young focused on Apple’s ability to keep growing sales of its flagship iPhone. “With AAPL’s base of devices growing, and our view that we are in the early stages of the 5G handset upgrade cycle that is likely to last the next several years, AAPL appears well positioned to grow iPhone revenue.

“We believe as the active base of installed iPhone users grow, Services is likely to grow multiple times faster and should result in strong margin mix shift,” they added.

A sustained 5G upgrade cycle and a sizable share gain of China’s market, with those total sales up an “impressive” 21%, are driven by strong demand for the iPhone 13, noted Angelo Zino, senior equity analyst at CFRA Research, who maintained a buy rating on Apple, in a note to clients.

“We think AAPL continues to demonstrate great pricing power, and we note an ongoing favorable product mix supporting wider margins,” said Zino.

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