Apple (AAPL) has exhibited amazing momentum over the past few months and is presently trading near all-time highs in the midst of this year’s bear market, having risen 33% from its June low.
The main concern right now is whether this surge will last given the recessionary environment. The company’s $2.8 trillion market capitalization which has a considerable impact on the S&P 500 index, this rise is crucial for the market to continue its upward trajectory.
Rising interest rates combined with high inflation could dent the demand for Apple’s products and services. According to experts, consumers typically postpone buying electronics, during recessions or when their spending power is declining. In addition, Apple’s suppliers started to show symptoms of weakening demand. Last week, Micron Technology (MU) issued a warning that sales should be less than its prior projection made few weeks ago for the current quarter.
If a second wave of the virus appears in the upcoming winter and chokes Apple’s supply lines, China’s stringent COVID regulations might still provide a barrier to the company’s expansion goals.
Is Apple a good stock to buy?
The recent rally made Apple shares expensive. Currently, it is valued at 27 times the expected 12-month profit, compared to an average of 17 over the past 10 years. Morgan Stanley predicted that Apple can reach $200 with $3 trillion market capitalization. Another quality that makes Apple an excellent long-term option is its safe-haven reputation and capacity to refund large amounts of cash during a hypothetical recession. With around $200 billion in cash, Apple is in an excellent position to immediately boost its share repurchase program as required, therefore sustaining its stock during bad times.
Overall, Apple is still a fantastic choice for long-term investors looking to purchase a large-cap defensive stock to weather a possible recession.