Representing 40% of Warren Buffett's portfolio, here is why Apple is a great stock to own today

Could Apple be the perfect stock for current market conditions?

| More on:
A woman is excited as she reads the latest rumour on her phone.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Uncertainty has been the name of the game recently, as the stock market continues to face an immense amount of pressure from high inflation, rising interest rates, and economic impacts linked to the war between Russia and Ukraine. It comes as no surprise that technology stocks have been particularly humbled, with the Nasdaq Composite slipping almost 25% since the start of the year.

Some of the world's paramount tech companies like Netflix and Meta Platforms have delivered weak financial reports in recent quarters as the technology sector as a whole tries to navigate unfavorable macroeconomic conditions. Apple (NASDAQ: AAPL), however, is one of few companies that has sustained strong operational success in the past few months. In a market full of uncertainty today, the technology juggernaut offers investors an ideal investment opportunity. I think the great Warren Buffett would agree as well -- the iPhone maker currently represents 40% of his Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) investment portfolio.  

Resiliency at its finest

Apple alleviated some investor unease by reporting an in-line Q2 2022 report. In the past twelve quarters, the tech leader has now beat earnings estimates each time and has only missed on revenue forecasts once, highlighting management's strong visibility of the business. Total revenue and earnings per share (EPS) both increased 8.6% year-over-year, up to $97.3 billion and $1.52, respectively, and operating margin remained stable from a year ago at 30.8%. 

The company has a fantastic one-two punch with its products and services business segments. While its products business -- which includes the iPhone, iPad, Mac, wearables, Home, and accessories -- increased a moderate 6.6% year-over-year to $77.5 billion, the company's services segment -- which comprises Apple Music, AppleTV+, the App Store, iCloud, and other subscription services -- surged 17.3% to $19.8 billion. 

Apple is well-positioned for future growth given its stable products segment and the untapped potential of its services business, which continues to make headway quarter after quarter. For the full year, Wall Street analysts project the company's revenue to climb 7.7% year-over-year to $394.0 billion, and its EPS to rise 9.4% to $6.14. I think Apple's steady growth in the wake of gloomy economic conditions, combined with its $28.1 billion in cash and cash equivalents, make the technology giant a no-brainer today. And fortunately for investors, the broader market sell-off has pulled Apple's stock price down with it, making the company's valuation attractive at the moment. 

Apple's valuation has normalized 

Apple's share price has fallen 19% year-to-date, making its valuation much more attractive than what it was at the start of the year. The stock currently sports a price-to-earnings multiple of 24, which is largely in line with its five-year average of 23. But unlike many of its technology counterparts, the company's valuation has shrunk in spite of maintaining success on the business front. Thus investors with lengthy time horizons can exploit the ongoing sell-off by purchasing shares of Apple at current valuation levels.

AAPL PE Ratio Chart

AAPL PE Ratio data by YCharts

I like Apple today

Apple is among the few technology companies that have continued to deliver strong financial results recently. Even still, the stock has been punished by investors, leaving it down almost 20% since the beginning of 2022. I believe investors should take advantage of the unjustified sell-off by accumulating shares of Apple stock today. The company's business is in wonderful condition, and I feel its robust balance sheet and cash generation make it a very stable investment right now. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Luke Meindl has positions in Apple. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway (B shares), Meta Platforms, Inc., and Netflix. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple, Berkshire Hathaway (B shares), Meta Platforms, Inc., and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A young entrepreneur boy catching money at his desk, indicating growth in the ASX share price or dividends
International Stock News

Why this high-flying investor is selling Tesla shares and buying this US tech stock instead

Ark Invest funds have been selling the electric vehicle maker's stock over the last few weeks and reinvesting the proceeds…

Read more »

two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.
International Stock News

Is Nvidia stock heading to $175?

The bulls are lining up ahead of Nvidia's earnings report next week.

Read more »

A woman holds a bitcoin token in her hand as she smiles at the camera in the background.
International Stock News

Bitcoin keeps soaring. Could it hit $95,000 this week?

Could the current crypto rally have enough juice to push the coin above that once-inconceivable level?

Read more »

A boy in a green shirt holds up his hands in front of a screen full of question marks.
International Stock News

2 reasons to buy Nvidia shares before November 20 (and 1 reason to wait)

This top AI stock has soared nearly 200% this year!

Read more »

A group of friends push their van up the road on an Australian road.
International Stock News

Why Tesla stock just pulled back

Tesla finally hit a speed bump after a blistering post-election rally.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
International Stock News

Why Tesla stock keeps going up

Tesla stock costs more than $1 trillion now. Is that too expensive?

Read more »

A businessman in soft-focus holds two fingers in the air in the foreground of the shot as he stands smiling in the background against a clear sky.
International Stock News

2 Numbers I'll be looking for on November 20 when Nvidia reports earnings

While many analysts and investors will be looking at revenue and profit growth, two other figures are more important to…

Read more »

A man wearing a blue jumper and a hat looks at his laptop with a distressed and fearful look on his face.
International Stock News

Magnificent Seven: Unstoppable tech stock giants or risky buys?

Did you know the "Magnificent Seven" moniker was meant as a warning, not an endorsement? Check out the risks and…

Read more »