Source: PaxForex Premium Analytics Portal, Fundamental Insight
Since Apple was founded nearly half a century ago, in 1976, it has made truly incredible strides. It has the highest market value in the world at $2.43 trillion, even after surviving a difficult 2022, when its stock price fell 27 percent, along with a broader sell-off in many other tech companies.
Since the beginning of this year, Apple stock has grown more than 20% while tech stocks slowly make a comeback on Wall Street. Nevertheless, the company's price-to-earnings (P/E) ratio of 26 is fairly low in comparison to competitors like Amazon with a P/E of 94, and Walt Disney with 55.
With that in mind, now seems like a good time to learn more about the iPhone company and consider investing in it. Here are a few aspects investors keep in mind considering Apple.
- The key to sustainable long-term growth lies in offering exceptional products
By focusing on product development and maintaining high-quality standards, Apple has been able to charge premium prices and foster consumer loyalty. As of September 2022, Apple has exceeded the 50% market share for smartphones, outpacing Alphabet's Android operating system. This is a significant accomplishment since consumers tend to stick with their preferred operating system for extended periods.
Expanding market share enables Apple to cross-promote its product line, providing users with complementary products that share a similar design language. For instance, iPhone users are unlikely to choose a Windows-based or Google Chrome computer over Apple's MacBook line when the need arises, according to Microsoft.
Apple's strong product line has propelled the company's stock up by 248% over the past five years and 911% over the past decade. Furthermore, Apple's revenue has increased by 48% to $394 billion since 2018, while operating income has surged by 68% to $119 billion.
- Apple maximizes iPhone profits
Apple's iPhone segment earned 52% of the company's total revenue last year, earning $205.4 billion and up 7% YoY. Thus, Apple's smartphone business is critical to the company's success, making the upcoming changes in iPhone production promising long-term profits.
On Jan. 9, Bloomberg reported that Apple plans to replace telecom and WiFi/Bluetooth chips from companies such as Qualcomm and Broadcom with its own versions by 2025. Then, on Jan. 11, the media site reported that Apple also plans to stop using iPhone displays from Samsung and LG as early as 2024 and switch to its own versions.
Ending costly partnerships in favor of in-house designed components will likely boost iPhone profit margins and strengthen the business by reducing Apple's reliance on outside technology companies.
- Diverse service offering strengthens business
In addition to strengthening the iPhone segment over the long term, Apple is strengthening its business by expanding in other areas.
The company's subscription-based services business is thriving with such offerings as Apple Music, TV+, iCloud, News+, Fitness+, and Arcade. In fiscal 2022, iPhone services revenue growth doubled, up 14% YoY to $78.1 billion. The segment's 71.7% profit margin also confirms the profitability of the digital business, while the same figure for products was 36.3% for the year.
In addition, it is reported that Apple is diversifying its product line by entering the augmented/virtual reality (AR/VR) market this year and launching a new headset. According to Grand View Research, the AR market will grow at a compound annual growth rate (CAGR) of 40.9% through at least 2030. Meanwhile, the VR market will grow by 15% in the same time frame. Thus, Apple's new headset could bring significant profits as the markets evolve.
Apple has established itself as a solid growth stock over the years, and upcoming events make it a screaming buy this month.
As long as the price is above 143.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 152.41
- Take Profit 1: 156.00
- Take Profit 2: 163.00
Alternative scenario:
If the level of 143.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 143.00
- Take Profit 1: 139.00
- Take Profit 2: 134.00
