Is Apple a Good Long-term Investment?

Since it was founded in the late 1970s, Apple Inc. (NASDAQ:AAPL) has become one of the biggest companies in the world.

Those who got in early made massive profits from Apple’s success. The question for new investors is whether Apple stock will continue to go up. In other words, is Apple stock a good long-term investment? 

Apple Intelligence Set To Be a Major Growth Driver?

Apple is set to significantly increase its investment in artificial intelligence – a clear indication that it aims to retain its leadership position among the Magnificent 7. Although Apple has been relatively more reserved with its AI ventures than Google and Microsoft (as evidenced by lower CAPEX spending), it is still responsible for substantial gains in this field.

Apple Intelligence is the personal intelligence system that produces the generative models used in iPhones, iPads, and Macs. It formulates the uniquely intuitive features in Apple devices that enable communication, work, and self-expression.

In short, AI has become essential to Apple’s business model as it contributes to the performance and built-in usability of the company’s devices and services. 

AI is deeply integrated into Apple’s most popular products. Examples include Apple’s digital personal assistant, Siri, and the iPhone’s camera features.

Privacy is one of the key characteristics that set Apple AI apart from the competition. AI processing takes place on users’ devices, rather than the more common method of using cloud-based AI solutions.

Apple’s AI investment is not limited to software development. The company has also been working on enhancing the functionality of chips. This is a critical component for the integration of AI, as the power and speed of chips determine AI capabilities. The new processor is part of Apple’s long-term plan to integrate AI more deeply into its ecosystem.

Apple is set to refresh the Mac computer brand with new in-house chips that come with built-in AI. The M4 processor, an upgrade to the M3 that was unveiled some months back, is expected to launch soon.

Mac systems powered by M4 processors are projected to hit the market in late 2024 or early 2025, and consumers will have the opportunity to choose from a variety of iMacs, a budget-friendly 14-inch MacBook Pro, a version of the flagship 14-inch and 16-inch MacBook Pros, and a selection of Mac minis.

Apple’s strategy includes adding AI technology and expertise through acquisitions. Between 2017 and 2023, Apple purchased over 20 AI startups, almost double the number that Microsoft and Meta acquired over the same period. These acquisitions have enabled the company to incorporate more advanced AI technologies into its products.

Overall, Apple Intelligence has demonstrated that it intends to continue its focus on upgrading and refining its AI capabilities in an effort to deliver faster, safer, and easier user interaction with Apple’s products and services.

Artificial intelligence integration is not only improving the features that are already familiar to consumers but will also create new capabilities that promise tremendous benefits for Apple customers. 

Product Launches Strengthen Apple’s Lead

Apple is enjoying steady growth due to its well-timed product release schedule. Through thoughtful, deliberate product updates and the introduction of new devices, Apple products have the advantage of bringing in stable revenues from engaged consumers.

As an extra benefit, the regular product releases drive attention to the brand, securing its status as a market leader. 

The iPhone and MacBook line are upgraded most often, followed by wearables such as the Apple Watch and smart home devices.

Examples of enhancements that influence consumer purchases include higher-quality photography tools and improved device performance.

Better still, Apple regularly gives its products makeovers, so tech enthusiasts will spend the cash required to display newer, sleeker models of the most popular computers and smartphones. 

Apple’s diversification strategy has been effective in unlocking new revenues. The company didn’t stop with its wildly popular iPhone but instead went on to develop Apple Watches, AirPods, and a host of other gadgets that connect to core Apple technology.

As consumers expand their relationship with the company, it is more difficult to switch to another brand. Apple relies on the high cost of switching to maintain its competitive edge. 

Apple devices have moved beyond simple communication and entertainment functions. They now offer advanced features that make a proven difference in users’ health.

For example, the Apple Watch comes with fitness tracking technology and sensors that perform basic ECGs, blood oxygen level monitoring, and heart rate monitoring.

More health-related advances are in the works, and physicians and patients look forward to better options for managing chronic conditions. 

One of Apple’s most recent product releases, the Apple Vision Pro, is considered Apple’s boldest move into the AR and VR industry. It uses enhanced hardware and highly sophisticated software to create stunning experiences.

The Vision Pro emphasizes the company’s strategy of building technology that moves beyond traditional consumer electronics.

In addition to its large collection of hardware and software, Apple offers a suite of tech-based services. Some of the most lucrative include Apple Music, Apple TV+, iCloud, and the App Store.

These enhance the user experience, deepen consumer relationships with the company, and boost overall revenue. For the quarter ending March 31st, Apple’s revenue from services increased 14% year over year to a record high of $23.9 billion.

It is also worth noting that the active installed base of Apple devices reached a record high across product lines in all geographies. However, in a surprise twist, the company posted quarterly revenue of $90.8 billion – a drop of 4% year over year.

Nevertheless, Apple’s strategy of continuous product launches coupled with the company’s stable financials is expected to drive medium and long-term growth. Analysts broadly agree that Apple is on track to extend its ecosystem further and strengthen its position as a market leader. 

Is Apple Stock a Good Long-Term Investment?

Apple has an exceedingly wide moat, strong cash flows, a culture of innovation, and a fortress balance sheet that bode well for investors as a long-term investment.

Seemingly unlimited innovation, stable financials, and market dominance aren’t the only reasons for buying Apple stock. The company also ensures reliable dividends for its investors.

This income stream is complemented by the likelihood of sustained capital appreciation stemming from Apple’s steady growth and new initiatives. 

Apple’s dividend payouts increased at a 5.6% CAGR over the past five years, and the board of directors has authorized an additional program to repurchase up to $110 billion of the company’s common stock.

Apple stock returns have been consistent over the past decade, with gains totaling more than 840%. The stock currently trades at a premium, roughly 34x earnings.

While analysts anticipate a slight short-term price decline, most still consider Apple stock a smart investment. At the moment, 22 of the 34 analysts covering the company have stated that Apple stock is a buy.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.