Source: PaxForex Premium Analytics Portal, Fundamental Insight
Like most companies, Apple's stock has been in constant ups and downs recently. The COVID-19 pandemic triggered a technology boom that saw many stocks skyrocket as consumers were forced to stay home and invested in home offices and entertainment. This period of prosperity led to Apple stock hitting an all-time high of $180.68 on Jan. 3, 2022.
Recently, however, macroeconomic problems have slowed consumer spending, causing many technology companies' stocks to fall. Last year, Apple stock was down 26.8%. Since Jan. 1, however, the stock has soared 22% as the market shows some signs of recovery. But they are still 13% below last January's all-time high.
Let's break down why now is the time to buy Apple stock after falling from its all-time high.
In the fiscal year 2022, the iPhone accounted for 52% of Apple's revenue, earning $205.5 billion and up 7% year over year. So the market was justifiably worried when a tightening of COVID-19 restrictions in China last November threatened the plant that makes about 70% of all iPhones. Subsequently, Apple stock fell 15 percent from Oct. 31, 2022, to Jan. 1, 2023.
This year, however, the company has attracted investors thanks to several measures to bolster its iPhone business. In the coming years, Apple plans to move production out of China, focusing primarily on India. The largest iPhone manufacturer, Foxconn (or Hon Hai Precision Industry), is investing $700 million to accelerate production in India.
Moreover, numerous Bloomberg reports showed that Apple is going to maximize iPhone profits by using more of its components in the future. The company reportedly plans to forgo costly partnerships with Samsung and LG to produce displays for the iPhone, using its versions as early as 2024. Apple is expected to do the same with its WiFi and Bluetooth chips, developing one that combines both capabilities to replace current chips from Broadcom and Qualcomm.
Apple is a diversified company, but when it comes to revenue, it needs to protect its main cash generator, the iPhone. Recent moves to further develop the smartphone business favor its long-term prospects.
In addition to strengthening the iPhone segment, Apple has guaranteed its long-term success by expanding its digital services business, allowing it to rely less on product revenue.
In fiscal 2022, revenue from services, including platforms such as Apple TV+, Music, iCloud, Fitness+, and Arcade, totaled $78.1 billion, up 14% year over year, double the growth of the iPhone. Even more promising is the fact that the profit margin for the services was 71.7%, compared to 36.3% for the products.
Apple was second in the music streaming market at 15%, behind only 31% of Spotify and 13% of Amazon Music. According to Grand View Research, the global music streaming market was valued at $29.5 billion in 2021 and is projected to grow at an average annual rate of 14.7% through 2030. In addition to growth from streaming video, fitness apps, and games, Apple's various services are likely to provide substantial growth for years to come.
What's more, Apple's services are getting a boost from the fact that the iPhone has a 24.1 percent market share of all smartphones, a figure that has grown rapidly over the years, with an 11.7 percent share in the first quarter of 2019. The company has strategically designed its services to be the optimal choice when using an iPhone, which has contributed to its mass adoption.
Apple stock is down 13% from its all-time high. But the company has a lucrative future, thanks to improved iPhone business and promising growth in digital services. Over the past year, Apple's forward price-to-earnings ratio has dropped 15% to 22, boosting the stock's value and making it a screaming buy right now.
As long as the price is above 155.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 159.77
- Take Profit 1: 164.00
- Take Profit 2: 170.00
Alternative scenario:
If the level of 155.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 155.00
- Take Profit 1: 147.00
- Take Profit 2: 142.00
