Despite being marred by several macroeconomic challenges in 2022, the technology sector is poised to witness a positive growth trajectory in the foreseeable future. Against this backdrop, let us explore FAANG stocks, Apple Inc. (AAPL) and Meta Platforms, Inc. (META), with an A grade for Quality in our proprietary POWR Ratings system.
The technology industry bore the brunt of macroeconomic headwinds last year due to the multi-decade-high inflation, the Fed’s hawkish stance, and recessionary fears. In 2023, the banking sector chaos tightening lending could affect the tech sector to some extent.
However, despite such hiccups, the tech sector, especially the FAANG companies, is expected to witness a comeback. Rising demand for advanced technology and soaring investments in cloud computing, software, cyber security, Artificial Intelligence (AI), and the Internet of Things (IoT), among others, could benefit the tech sector.
McKinsey’s stats show that more than half of companies are investing more than 5% of their digital budgets in AI. Meanwhile, 63% say that they expect their investments in AI to increase over the next three years.
Moreover, according to Gartner Inc. (IT), global IT spending is expected to increase 5.5% from 2022 to $4.6 trillion this year. John-David Lovelock, Distinguished VP Analyst at Gartner, said, “Macroeconomic headwinds are not slowing digital transformation.”
Additionally, big tech stocks like the FAANG companies could navigate a volatile market backdrop on the backs of their scale. Moreover, these stocks enjoy a leadership position within the tech industry due to their stellar growth in the recent past.
Given this backdrop, quality FAANG stocks AAPL and META could be sound watchlist additions now.
Apple Inc. (AAPL)
With a market capitalization of $2.63 trillion, AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone; iPad; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
In terms of the trailing-12-month net income margin, AAPL’s 24.56% is 812.9% higher than the industry average of 2.69%. In addition, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 147.94%, 39.29%, and 27.45% are significantly higher than the industry averages of 1.96%, 1.97%, and 0.66%, respectively.
Recently, AAPL previewed Apple BKC, the first Apple Store® in India. Located in Mumbai’s Bandra Kurla Complex financial, arts, and entertainment district, Apple BKC will serve as a dynamic space where customers can come together, explore Apple products and services, enjoy exceptional service, and learn how to get more out of their devices through free Today at Apple® sessions.
AAPL’s CFO, Luca Maestri, said, “We set an all-time revenue record of $20.8 billion in our Services business, and in spite of a difficult macroeconomic environment and significant supply constraints, we grew total company revenue on a constant currency basis. We generated $34 billion in operating cash flow and returned over $25 billion to shareholders during the quarter while continuing to invest in our long-term growth plans."
AAPL’s total net sales for its fiscal first quarter (ended December 31, 2022) stood at $117.15 billion, while its gross margin came in at $50.33 billion. Its net income and earnings per share came in at $30 billion and $1.88, respectively. As of December 31, 2022, the company had $21.97 billion in cash, cash equivalents, and restricted cash; and $128.78 billion as total current assets.
Analysts expect the company’s revenue to reach $92.65 billion for the fiscal fourth quarter ending September 2023, representing a 2.8% rise year-over-year. Its EPS for the same quarter is expected to increase 7.8% year-over-year to $1.39. It surpassed its consensus EPS estimates in three of the four trailing quarters, which is impressive.
Over the past six months, the stock has gained 15.8% to close the last trading session at $166.47. Moreover, it gained 23.1% over the past three months. Wall Street analysts expect the stock to reach $174.28 in the upcoming 12 months, indicating a potential upside of 4.7%.
AAPL’s balanced outlook is reflected in its POWR Ratings. It has an A grade for Quality and a B for Momentum. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It is ranked #18 out of the 40 stocks within the Technology - Hardware industry. To see the additional ratings of AAPL’s Growth, Value, Stability, and Sentiment ratings, click here.
Meta Platforms, Inc. (META)
With a $558.97 billion market capitalization, META develops social media applications to connect through mobile devices, personal computers, virtual reality headsets, and in-home devices worldwide. The company operates through two segments ─ Family of Apps (FoA) and Reality Labs (RL). Its products include Facebook, Instagram, Messenger, WhatsApp, and Oculus.
In terms of the trailing-12-month net income margin, META’s 19.90% is 496% higher than the industry average of 3.34%. In addition, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 18.52%, 14.38%, and 12.49% are 530.7%, 306.1%, and 846.4% higher than the industry averages of 2.94%, 3.54%, and 1.32%, respectively.
META’s revenue for its fiscal fourth quarter, which ended December 31, 2022, stood at $32.17 billion. Its net income and earnings per share came in at $4.65 billion and $1.76, respectively. As of December 31, 2022, the company had $15.60 billion in cash, cash equivalents, and restricted cash; and $59.55 billion as total current assets.
The company expects first-quarter 2023 total revenue to be between $26 billion and $28.50 billion.
Analysts expect the company’s revenue to reach $29.70 billion for the fiscal third quarter ending September 2023, representing a 7.2% rise year-over-year. Its EPS for the same quarter is expected to increase 43.7% year-over-year to $2.36.
Over the past six months, the stock has gained 64.1% to close the last trading session at $217.89. Moreover, it has gained 63.8% over the past three months. Wall Street analysts expect the stock to reach $232.52 in the upcoming 12 months, indicating a potential upside of 6.7%.
META’s POWR Ratings reflect its sound prospects. It has an A grade for Quality and a B for Sentiment. It is ranked #17 in the 61-stock Internet industry.
Click here to see META’s Growth, Value, Stability, and Momentum ratings.
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AAPL shares were trading at $166.21 per share on Wednesday morning, down $0.26 (-0.16%). Year-to-date, AAPL has gained 28.12%, versus a 8.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
FAANG Stocks META and AAPL Maintain Quality With A Ratings StockNews.com
