Tuesday, January 3, 2023 11:35 amTuesday, January 3, 202312 Comments

• Opinion

Apple stock is at a 52-week low and could fall further, but it’s starting to look like a compelling buy for long-term investors, Daniel Foelber writes for The Motley Fool.

Daniel Foelber for The Motley Fool:

Arguably the most reasonable cause of the Apple stock decline is that its business is facing plenty of challenges heading into 2023. In hindsight, it’s clear to see that the pandemic brought forward a lot of demand for consumer electronics.

In fiscal 2021, Apple’s revenue rocketed 64.9% compared to fiscal 2020, while net income surged 33.2%. But when it reported its fourth-quarter and full-year fiscal results (for the period ended Sept. 24), revenue was only up 7.8% compared to fiscal 2021, and net income only increased 5.4%.

MacDailyNews Take: “Only.” Apple in 2022 posted a September quarter record revenue of $90.1 billion. Annual revenue was $394.3 billion and annual earnings per diluted share were $6.11, up 9 percent year over year.

In mid-August, when the stock was barely down on the year, it had a price-to-earnings (P/E) ratio of 28.8. But the sell-off has brought Apple’s P/E down to a much more attractive 20.6. Meanwhile, the S&P 500 has a P/E of 19.7… In sum, Apple stock deserved to fall, but now it’s at a point where it’s an attractive valuation for long-term investors.

Perhaps the least talked-about red flag for Apple is its rising debt position. Its total net long-term debt is now at an all-time high… In the past, Apple used its lush cash position to buy back its own stock at opportune times and reinvest in the business. This time around, it may be pressured to use free cash flow to pay down debt instead of buying back its own stock.

MacDailyNews Take: Only those who like excellent deals and long term profits should invest in Apple right now.

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