Source: PaxForex Premium Analytics Portal, Fundamental Insight
Apple is one of the most popular companies in the world. Its flagship product, the iPhone, is one of the most successful tech devices of all time.
This popularity has helped make Apple stock successful and in demand for more than a decade. But is it still possible to buy this stock? There are certainly opinions on both sides.
Let's look at both sides and try to determine who wins the argument for Apple stock - the bulls or the bears.
Decades of proven innovation underlie the bullish stance on Apple. The company has developed many iconic products that have generated billions of dollars in sales, and that ability is attractive to investors. The ability to constantly come up with something new that consumers want suggests that Apple can continue to grow revenues even when sales of its current lineup begin to decline (which is not happening with the current lineup yet).
Annual revenue rose from $156 billion a decade ago to $365 billion in the most recent fiscal year. This growth increased annual operating income from $55 billion to $109 billion over the same period. Various versions of the iPhone accounted for most of that growth, and there are no signs of a slowdown.
In the latest quarter, iPhone sales (now in its 13th year) rose to $50.6 billion from $47.9 billion in the previous quarter. The latest update includes the latest 5G technology, spurring upgrades to older models.
What's more, the popularity of the iPhone has allowed Apple to build a robust services business that complements the groundbreaking smartphone. The company boasts 825 million service subscribers, up 165 million from last year. The lineup of services includes Apple Music, Apple TV+, iCloud, Apple Fitness and more. Note that the gross margin in the services segment is 72.6 percent and 36.4 percent in the products segment.
Not only do these 825 million subscribers generate high-margin revenue for Apple, they are prime candidates to buy its newest products. By entering the Apple ecosystem and customizing products and services to their liking, customers are likely to stick around for the long haul.
Proponents of the bear scenario recognize that Apple is a hugely successful innovator with decades of proven results. However, the arguments against investing in Apple have to do with the dependence on the iPhone. While Apple has done an excellent job of creating in-demand consumer electronics such as the iPod, iPad, AirPods, Apple Watch, etc., it is still heavily dependent on the iPhone.
In the last quarter, the iPhone accounted for 52% of the company's total sales. That's not even counting all the related accessories. The risk is that if Apple doesn't continue the success of the iPhone, revenue growth could stagnate or even go into reverse. Similarly, if another business creates more attractive consumer electronics that supplant the iPhone, it could be a disaster for Apple.
There is talk of creating glasses that can do everything a smartphone can do, and more. Virtual reality headsets are gaining popularity along with the meta universe. Innovation is unpredictable. If Apple relies so heavily on one product for 52% of sales, it adds another layer of risk to the business.
Overall, the bulls' arguments carry more weight. Of course, Apple's reliance on the iPhone carries some risk. Nevertheless, given its decade-long history of creating many innovative products, Apple has a good chance of switching to the next popular thing.
While the price is below the 137.00 level, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 130.88
- Take Profit 1: 128.00
- Take Profit 2: 120.00
Alternative scenario:
If the level of 137.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 137.00
- Take Profit 1: 142.00
- Take Profit 2: 150.00
