Apple Q2 Earnings Report Reinforces It Will Be 'Top-Performing' FAANG Stock Of 2021, Says Munster

Apple Inc. AAPL will remain a growth story for the foreseeable future despite fluctuations in growth rates, according to Loup Ventures analyst Gene Munster.

What Happened: In a research note, Munster said that Apple will benefit from a multiyear 5G cycle, an accelerating digital transformation driving demand for its products and services, as more people work and learn from home, and eventual new product categories.

The analyst believes the Cupertino-based company’s March quarter results announced on Wednesday were a step toward his prediction that the tech giant will be the top-performing FAANG stock this year.

The group of Facebook Inc. FB, Apple, Amazon.com Inc. AMZN, Netflix Inc. NFLX and Alphabet Inc. GOOG GOOGL is often used as a market indicator for high-growth tech names and is the main theme of Loup's projections.

“Over the next couple of years, we expect the company will offer hardware subscription offerings that build toward a 360° bundle, along with eventually addressing the massive opportunity around autonomy with Apple Car,” Munster said.

Apple’s goal to be net cash neutral over time means investors can expect an additional $83 billion in cash to be returned through buybacks and dividends or otherwise strategically deployed, according to the analyst.

However, Munster expects Apple’s overall revenue in the third quarter will decline by about 20% sequentially, with component shortages having a negative impact of $3 billion to $4 billion on the Mac and iPad business in the quarter.

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Why It Matters: Apple has thrived despite the pandemic. On Wednesday, Apple reported second-quarter results that exceeded analysts’ expectations, added $90 billion to its share buyback and raised its dividend by 7% to 22 cents per share.

Apple’s services revenues — the category that includes cloud storage and backup, digital content and payment services — is now the tech giant’s second-largest segment after the iPhone. The company has increased its focus on the segment following sluggish iPhone sales over the past few years.

Apple has recently refreshed the iPad line amid strong demand for the tablets as people continue to work and study from home due to the pandemic.

Apple has also quietly been working on pushing into virtual reality and augmented space for years. It was reported in March that Apple plans to launch its long-rumored mixed reality headset in the middle of next year, followed by augmented reality glasses by 2025.

Price Action: Apple shares closed 0.6% lower in Wednesday’s regular trading session at $133.58, but rose 2.3% in the after-hours session to $136.70.

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