APPLE:FUNDAMENTAL ANALYSIS+PRICE ACTION|NEXT TARGET|LONG🔔🔔

9. Sept. 2021

Apple stock has risen about 48,660% over the past two decades and recently reached a new all-time high. Apple was once considered an outsider in the technology sector, but under Steve Jobs' leadership, it launched the iPod, iPhone, and iPad and became one of the most expensive technology companies in the world.

After Job died in 2011, Apple continued to grow under Tim Cook, releasing new iPhones, new hardware devices such as the Apple Watch, and expanding its ecosystem of software and services. Apple also restored its dividend, began an aggressive stock buyback, and invested in next-generation technologies such as augmented reality and connected cars.

Apple became a trillion-dollar company three years ago and a $2 trillion company last year. But after such tremendous long-term growth, investors who don't already own Apple may wonder if it's too late to buy the stock. Let's look at the bearish and bullish arguments for Apple to come to some sort of conclusion.

Bears usually mention Apple's dependency on the iPhone, which accounted for 54% of its revenue in the first nine months of fiscal 2021, as its main vulnerability. Apple's iPhone sales increased this year as more customers purchased the first line of 5G iPhones, but that growth is likely to slow in 2022 as less customers think that the iPhone 13 is an important upgrade.

Strong competition and commoditization of the smartphone market also are still principal long-term menaces to Apple's biggest segment.

It is not clear if Apple will ever be able to release another innovative product like the iPhone, and the absence of certainty about its plans is troubling.

Another weakness is Apple's reliance on China, which accounted for 19% of its revenue in the first nine months of this year. China is Apple's fastest-growing market, but it is also a minefield of inconstant regulations, tariffs, and boycotts caused by nationalism. If current trade and technology tensions between the U.S. and China escalate, Apple could become an easy target for retaliatory regulations, taxes, or bans.

The bears will also lead to the fact that Apple has become too dependent on stock buybacks in recent years. In the past 12 months, the company has spent $82.4 billion on buybacks and even financed some of those purchases with fresh debt. Apple could have spent more of this money on investments and acquisitions to diversify its business beyond the iPhone.

Finally, Apple's expansion of its service ecosystem faces serious long-term challenges. The App Store is being forced to cut rates, and many of the new subscription services (Apple TV+, Apple Music, and Apple Arcade) are probably operating at a loss to attract more users.

Bulls, on the other hand, believe that Apple phones will continue to retain consumers thanks to their software ecosystems and that device sales, while cyclical, will remain stable over the long term.

Apple is also not sitting still, depleting the iPhone's potential. The company is reportedly developing augmented reality devices, an electric car, and other new services to go beyond individual hardware platforms.

As for China, the bulls believe that Apple will make concessions (most likely in terms of censorship and data protection) to stay in good standing with the government and that its symbiotic relationship with China through Foxconn, the country's largest private employer, will protect it from retaliatory regulatory measures.

The bulls will point out that while Apple is spending a lot of money on buybacks, it had $193.6 billion in cash, cash equivalents, and marketable securities left last quarter, giving it plenty of room for future acquisitions. Moreover, the company only issued new debt because interest rates were so low.

As for expanding the ecosystem, Apple can offset the losses of its new subscription services, which now serve more than 700 million subscribers worldwide, with higher-margin App Store revenue-even if some developers and regulators pressure it to reduce its 15%-30% share. Attracting more subscribers also ties them more firmly to the company's iPhones and other hardware devices.

Finally, Apple stock is still fairly highly valued. Analysts expect the company's revenues and profits to grow 33% and 70%, respectively, this year, and more modest growth next year as it reaches the peak of iPhone 13 sales.

Thus, we can safely conclude that Apple is still an excellent long-term investment, and it is not too late to buy the stock now. The company probably won't be able to replicate its achievements of the past two decades in the next 20 years, but its core businesses remain strong, its brand evokes fierce loyalty, and it has enough money to fund its future expansion plans beyond the iPhone.