Source: PaxForex Premium Analytics Portal, Fundamental Insight
Smart investors are well aware of three key aspects concerning Apple, the tech giant that always grabs Wall Street's attention. With a staggering market cap of $2.9 trillion, making it the world's most valuable company, Apple continues to dominate headlines throughout 2023. Notable developments include their strategic plans to shift manufacturing away from China, the introduction of their groundbreaking virtual/augmented reality (VR/AR) headset, and their venture into fintech by launching a savings account.
The start of 2023 witnessed an impressive surge of approximately 50% in Apple shares. This remarkable growth, coupled with the company's reputation for consistent expansion, has captivated investors, fueling anticipation as its market cap edges closer to the extraordinary $3 trillion mark. Given its robust long-term prospects, gaining a deeper understanding of Apple and considering investment opportunities is a prudent move for investors.
Outlined below are three crucial insights that intelligent investors possess regarding Apple.
- Apple Reigns Supreme in the World of Consumer Tech
With unparalleled brand loyalty, Apple has established itself as the undisputed king of consumer tech. Since the debut of the first-generation iPhone in 2007, the company has consistently achieved remarkable growth. In fiscal 2022, the revenue from its smartphone segment witnessed a solid 7% year-over-year increase. What sets Apple apart is its ability to maintain strong consumer demand, even during challenging economic conditions.
In 2022, the entire tech market faced macroeconomic headwinds, causing a slump in growth. Industry leaders like Samsung and Xiaomi experienced substantial declines in smartphone shipments, with 19% and 24% drops, respectively, in the first quarter of 2023. However, during the same period, Apple's iPhone segment reported a noteworthy 2% rise in revenue, demonstrating the resilience of its business.
The widespread popularity of the iPhone has become a significant advantage for Apple when promoting its other products and services. The seamless connectivity among Apple devices has facilitated the company's dominance in market shares for tablets, smartwatches, and headphones. Additionally, its digital services such as Apple TV+, Music, Fitness+, and more have emerged as the second-highest-earning segment for the company.
Considering Apple's track record of success when venturing into new product categories, the recently unveiled Vision Pro headset, combining virtual reality (VR) and augmented reality (AR), holds promising long-term potential. Investing in this tech giant could mean investing in the future leader of the rapidly expanding $31 billion market.
- Apple Quietly Embraces AI Advancements
While tech giants like Microsoft, Alphabet, and Advanced Micro Devices heavily emphasize "artificial intelligence" (AI) during their earnings calls, Apple has taken a different approach. Rather than explicitly labeling its technologies as AI, the company focuses on highlighting the new features it develops using AI models and machine learning.
This strategic move to avoid direct AI references serves Apple well, as it sets itself apart from other companies in the industry. By sidestepping direct comparisons, Apple mitigates potential stock volatility in the future while effectively integrating AI technology into its products.
During its Worldwide Developers Conference on June 5, Apple unveiled various AI-driven features across its product lineup. For instance, the iPhone's autocorrect functionality now utilizes a model similar to ChatGPT, learning from user text and typing patterns. Additionally, AirPods Pro can automatically disable noise cancellation when the wearer engages in conversation.
As a prominent player in the consumer tech sector, Apple's ability to manufacture devices that bring AI into the hands of the public positions it as a significant contributor to the sector's development.
- Apple's Stock Valuation Slightly Pricey
Apple's stock has experienced a bullish run this year, driven partially by the anticipation of reaching a $3 trillion market cap. However, the rally seems disconnected from the company's recent financial performance, as it reported revenue declines for two consecutive quarters: a 5.5% decrease in the first quarter and a 2.5% decrease in the second.
Consequently, Apple's price-to-earnings ratio (P/E) has surged by 54% since the beginning of the year and currently stands at 33. Typically, a P/E ratio below 20 is considered favorable, implying a good value proposition. Hence, Apple's stock is slightly expensive at its current price point.
Nevertheless, it's worth noting that Apple's shares remain comparatively cheaper than many of its peers. Among the "Big Five" tech companies, the chart indicates that only Alphabet boasts a better P/E ratio than Apple.
While a recent rally may have impacted the value of Apple's stock, it's important to consider the long-term perspective. Over the past five years, the company's shares have witnessed an astonishing surge of approximately 320%. This impressive growth demonstrates the potential for substantial returns on investment over an extended period.
Furthermore, Apple's expanding presence in emerging fields like AI and VR/AR positions the company for continued success. With a strategic focus on these technologies, Apple is likely to maintain its current trajectory of growth and innovation. By holding onto Apple stock for the long term, investors stand to benefit from the company's ongoing advancements and their potential impact on the market.
As long as the price is above 182.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 193.48
- Take Profit 1: 200.00
- Take Profit 2: 210.00
Alternative scenario:
If the level of 182.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 182.00
- Take Profit 1: 175.00
- Take Profit 2: 170.00
