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Apple (AAPL) Tops $3T Milestone: More Upside Left for 2024?
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In December, Apple Inc. (AAPL - Free Report) once again became a $3 trillion company for the first time in about four months. Apple’s shares have easily outperformed the broader S&P 500 so far this year (+51.5% versus +24.1%). Moreover, Apple’s shares are on track to register the best annual gains since 2020, when it soared 81%.
Image Source: Zacks Investment Research
However, 2023 hasn’t been smooth sailing for Apple as it has had to deal with a plethora of macroeconomic bottlenecks that adversely impacted spending patterns across the consumer tech sector. Foreign exchange headwinds, in particular, dragged Apple’s revenues during fiscal 2023, which ended in September.
But it’s also true that Apple’s revenues during the first half of fiscal 2023 declined 4% year over year, while it had fallen only 1% in the second half, a tell-tale sign that revenue trends are improving. To top it off, Samsung and Alphabet Inc.’s (GOOGL - Free Report) smartphone shipments tanked more than Apple’s iPhone shipments in recent times, indicating the company’s dominance in the tech sector despite vulnerability to economic and geopolitical issues.
Most importantly, Apple is overshadowing recent challenges due to its loyal customer base. Apple’s devices are being used worldwide, and the company takes pride in having more than two billion active devices. CEO Luca Maestri, on the latest earnings call, confirmed that users of Apple’s devices are growing at a nice pace, which should certainly boost the company’s profit margins soon.
Due to the immense brand loyalty that Apple relishes, its shares have been able to outdo its peers in the long run. For instance, over the past five-year period, shares of Apple have surged 422.3%, while shares of Microsoft Corporation (MSFT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , and Alphabet have gone up 279.9%, 122.8%, and 175.8%, respectively.
Image Source: Zacks Investment Research
Nonetheless, Apple is well-poised to outperform its competitors next year as well due to the strength of its services business. Apple, traditionally a hardware company, is now finding it difficult to come up with breakthrough innovations in its smartphones, tablets and various other devices.
However, Apple’s service division, which includes Apple Pay, subscriptions, and licensing fees, continues to provide a steady stream of income. An increase in transaction accounts, and recurring billing due to Apple’s large customer base is helping its revenues from services grow by leaps and bounds.
After the iPhone, Apple’s services business is at present becoming the highest-earnings segment. In reality, revenues from the services segment increased 9% year over year in fiscal 2023, while net iPhone sales dropped 2%. Therefore, it is not startling that Apple is currently placing a lot more priority on its digital offerings than product sales.
Apple’s services segment, by the way, is also well-unified with its hardware segment, which binds the customers to its ecosystem. This means that users are less likely to purchase non-Apple products, which eventually bodes well for the company.
Apple is also heavily investing in the artificial intelligence (AI) boom. AAPL is focusing on generative AI, and its outlays on AI-related research and development increased by more than $3 billion this year.
The AI market in itself is expected to explode, with Bloomberg Intelligence estimating the market to expand to $1.3 trillion in the next 10-year period from just $40 billion in 2022. Thus, it’s quite evident that Apple's initiative to venture into the AI field will benefit the organization immeasurably in the near future.
Thus, banking on dependable customers, strength in the services segment, and developments in the AI field, Apple’s expected earnings growth for next year increased by 8.2%. Its projected earnings growth rate for the next five-year period also surged 11%.
Apple’s net profit margin, meanwhile, is a solid 25.3%, and as a rule of thumb, above 20% is already a high margin. That means the company is in a position to generate enough profit from its sales, and its operational costs are under control. All these positives should certainly help Apple’s shares scale northward. Apple, presently, has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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Apple (AAPL) Tops $3T Milestone: More Upside Left for 2024?
In December, Apple Inc. (AAPL - Free Report) once again became a $3 trillion company for the first time in about four months. Apple’s shares have easily outperformed the broader S&P 500 so far this year (+51.5% versus +24.1%). Moreover, Apple’s shares are on track to register the best annual gains since 2020, when it soared 81%.
Image Source: Zacks Investment Research
However, 2023 hasn’t been smooth sailing for Apple as it has had to deal with a plethora of macroeconomic bottlenecks that adversely impacted spending patterns across the consumer tech sector. Foreign exchange headwinds, in particular, dragged Apple’s revenues during fiscal 2023, which ended in September.
But it’s also true that Apple’s revenues during the first half of fiscal 2023 declined 4% year over year, while it had fallen only 1% in the second half, a tell-tale sign that revenue trends are improving. To top it off, Samsung and Alphabet Inc.’s (GOOGL - Free Report) smartphone shipments tanked more than Apple’s iPhone shipments in recent times, indicating the company’s dominance in the tech sector despite vulnerability to economic and geopolitical issues.
Most importantly, Apple is overshadowing recent challenges due to its loyal customer base. Apple’s devices are being used worldwide, and the company takes pride in having more than two billion active devices. CEO Luca Maestri, on the latest earnings call, confirmed that users of Apple’s devices are growing at a nice pace, which should certainly boost the company’s profit margins soon.
Due to the immense brand loyalty that Apple relishes, its shares have been able to outdo its peers in the long run. For instance, over the past five-year period, shares of Apple have surged 422.3%, while shares of Microsoft Corporation (MSFT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , and Alphabet have gone up 279.9%, 122.8%, and 175.8%, respectively.
Image Source: Zacks Investment Research
Nonetheless, Apple is well-poised to outperform its competitors next year as well due to the strength of its services business. Apple, traditionally a hardware company, is now finding it difficult to come up with breakthrough innovations in its smartphones, tablets and various other devices.
However, Apple’s service division, which includes Apple Pay, subscriptions, and licensing fees, continues to provide a steady stream of income. An increase in transaction accounts, and recurring billing due to Apple’s large customer base is helping its revenues from services grow by leaps and bounds.
After the iPhone, Apple’s services business is at present becoming the highest-earnings segment. In reality, revenues from the services segment increased 9% year over year in fiscal 2023, while net iPhone sales dropped 2%. Therefore, it is not startling that Apple is currently placing a lot more priority on its digital offerings than product sales.
Apple’s services segment, by the way, is also well-unified with its hardware segment, which binds the customers to its ecosystem. This means that users are less likely to purchase non-Apple products, which eventually bodes well for the company.
Apple is also heavily investing in the artificial intelligence (AI) boom. AAPL is focusing on generative AI, and its outlays on AI-related research and development increased by more than $3 billion this year.
The AI market in itself is expected to explode, with Bloomberg Intelligence estimating the market to expand to $1.3 trillion in the next 10-year period from just $40 billion in 2022. Thus, it’s quite evident that Apple's initiative to venture into the AI field will benefit the organization immeasurably in the near future.
Thus, banking on dependable customers, strength in the services segment, and developments in the AI field, Apple’s expected earnings growth for next year increased by 8.2%. Its projected earnings growth rate for the next five-year period also surged 11%.
Apple’s net profit margin, meanwhile, is a solid 25.3%, and as a rule of thumb, above 20% is already a high margin. That means the company is in a position to generate enough profit from its sales, and its operational costs are under control. All these positives should certainly help Apple’s shares scale northward. Apple, presently, has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.