Source: PaxForex Premium Analytics Portal, Fundamental Insight
If you follow Apple from an investment perspective - and even if you don't - you probably already know that most of its revenue comes from iPhone sales. That's why analysts covering the tech giant are constantly speculating about how many iPhones it will be able to deliver in any given year.
In addition, of course, Apple also sells iPads, Macs, Apple Watches, AirPods, Apple TVs, HomePods, and other devices. However, an analysis of Apple's hardware sales provides only a superficial understanding of its sprawling business. To dive deeper, let's look at a few more facts about Apple that only the smartest investors are likely to know.
- Apple runs a captivating ecosystem
Apple's services segment, which generated 18% of its revenue in the first half of fiscal 2022, is perhaps more important than any of its hardware businesses. This segment includes iCloud, Apple Pay, the App Store, and subscription-based digital media services such as Apple Music, Apple TV+, Apple Arcade, and Apple Fitness+. It also covers Apple Care services.
These are the building blocks of an ecosystem that essentially captures Apple customers and builds their loyalty to iOS devices. Unlike Alphabet's Android OS, which allows users to easily switch between different brands of Android devices without losing data, Apple's own operating system and services guide its customers down a single upgrade path to other iOS devices.
As of March, 26-the end of the second quarter of fiscal 2022-Apple had 825 million paid subscriptions for all of its services, a net increase of 165 million paid subscriptions over the previous 12 months. During the conference call, CFO Luca Maestri said the company "will continue to improve the breadth and quality of our current service offerings while launching new services."
- The company continues to have exceptional loyalty
In October, a study by Consumer Intelligence Research Partners found that Apple's iPhone loyalty rate in the U.S. has exceeded 90 percent for the past three consecutive years. None of the Android market leaders, including Samsung, came close to that figure.
Apple's customer loyalty is also fueled by the company's rise as a global luxury brand. A few years ago, the Hurun Research Institute found that Apple surpassed LVMH's Louis Vuitton, Hermès, and Richemont's Cartier as the most coveted luxury brand in China.
No other smartphone manufacturer made the list. This prominence gives Apple far more pricing power than its industry peers.
- The company's future will be augmented
Over the next few years, Apple plans to use the appeal of its brand to launch new hardware products. The company's first target is likely to be the nascent market for augmented reality (AR) and virtual reality (VR) devices.
Apple is reportedly developing at least two AR/VR devices. The first is rumored to be an AR/VR "mixed reality" headset that could be available in 2023. This device could compete with Microsoft's Quest HoloLens and Meta Platforms headsets.
The second device could be a sleeker pair of AR smart glasses, which could arrive in 2024 or 2025. Meta, which launched the Ray-Ban Stories smart glasses last year, also has similar products in development.
Apple has created a new operating system for these AR/VR devices called rOS, which includes its own app store. These plans suggest that Apple will become a major competitor to Meta in the burgeoning metaverse market.
Finally, Apple is also developing an autonomous electric vehicle (EV) codenamed "Project Titan". According to recent rumors, it could be launched between 2024 and 2028, but so far, not much is known about this vehicle. If Apple does launch a luxury electric car, it could create problems for market leaders like Tesla and newcomers like Lucid.
For Apple, the upcoming year-over-year comparisons will be challenging, as the company's sales grew significantly last year due to people switching to 5G devices. Like all economic companies, the company also faces supply chain challenges. Therefore, investors should expect the company's growth to slow down this year.
Nevertheless, Apple still has a lot to live up to, and we think its stock is reasonably valued at 23 times its earnings forecast. The company's stock may not skyrocket anytime soon - especially amid rising interest rates - but it's still a solid investment for long-term investors.
As long as the price is below 150.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 139.80
- Take Profit 1: 132.00
- Take Profit 2: 125.00
Alternative scenario:
If the level of 150.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 150.00
- Take Profit 1: 155.00
- Take Profit 2: 163.00
