2 New Reasons To Buy Apple Stock

Reasons To Buy Apple Stock: It has never been a bad time to buy Apple stock. Since the company’s public trading debut in 1980, shares have gained more than 225,00 percent.

Most of the growth occurred over the past 15 years, thanks to the 2007 release of the first iPhone. That device and all of the iPhone generations that followed transformed the relationship between people and technology. As of September 2021, more than two billion iPhones have been sold.

Apple’s success and its prospects for continued growth have caught the attention of world-class investors. Apple is the top Warren Buffett stock, making up more than 40 percent of Berkshire Hathaway’s portfolio.

In a recent report, Berkshire Hathaway reported that it had realized $100 billion in Apple-related profits since its first purchase of Apple stock in 2016.

Buffett continues to build Berkshire Hathaway’s position in Apple – especially when share prices dip. In the first quarter of 2022, he added another $600 million worth of Apple stock to Berkshire Hathaway’s portfolio.

Investors who haven’t added Apple to their own portfolios quite yet have two new reasons to buy Apple stock: Apple Pay Later and the recent share price dip.

What Is Apple Pay Later?

Apple is leading the digital payment revolution by making cash and physical credit and debit cards obsolete.

It launched electronic payment platform Apple Pay in 2014. This service allows consumers to load card information into a secure mobile wallet, then make touchless purchases online or by scanning phones at Apple Pay-enabled points-of-sale.

Apple Pay controls a massive portion of the US mobile payment and mobile debit wallet markets, and it has more than half a billion registered users worldwide.

The service is only supported through devices manufactured and sold by Apple – for example, iPhones, iPads, and Apple Watches – which keeps consumers locked into the Apple ecosystem.

The newest addition to the Apple family is Apple Pay Later, which was announced at the Worldwide Developers Conference in early June. This marks the latest buy now, pay later (BNPL) service to hit the market, joining BNPL products from PayPal, Affirm, Klarna, and others.

Buy now, pay later isn’t the same as a credit card. Credit cards come with open, revolving lines of credit and typically require credit checks, fees, and interest charges. The basic BNPL service has no credit check up to a certain buying limit and spreads the cost of a single purchase over four equal payments.

The guaranteed interest-free, fee-free loans are short-term, as long as payments are made on time according to the initial terms of the agreement. The main source of revenue for BNPL companies is merchant fees – and merchants are willing to pay, as these guaranteed-approval credit plans dramatically improve the likelihood that a customer will buy.

The combination of Apple Pay and Apple Pay Later is expected to present a formidable challenge to competing digital payment and BNPL platforms.

At the moment, just six percent of Apple device owners use their Apple Pay capabilities, but that figure is growing. With the new BNPL option, consumers are expected to begin or increase usage of Apple Pay, pulling market share away from other providers.

Investors immediately saw the writing on the wall, and they started dumping competing BNPL stocks. For example, Affirm stock went down more than 20 percent in the first week of trading after the Apple Pay Later announcement, and PayPal stock dropped more than ten percent over the same period.

Why Is Fintech Important To Apple Stock?

The iPhone has driven Apple’s revenue for years, but industry and market experts as well as Apple leadership is well aware that they can’t rely on the iPhone forever. Branching into complementary products and services secures Apple’s future, and it looks like fintech will play an important role in that equation.

Apple Pay Later isn’t the only new enhancement to Apple Pay. Apple will offer tap-to-pay services so that merchants can accept Apple Pay without special hardware, and purchases made through Apple Pay will include automatic order tracking.

If the current collection of fintech services has the expected result of increasing Apple’s revenues and creating deeper relationships with its customers, there is every reason to believe Apple will explore other aspects of the digital financial services industry.

After all, the more people come to rely on Apple Pay and all of its benefits, the more likely they are to upgrade their iPhone each time the company releases a newer model.

Why Did Apple Stock Go Down?

The tech industry has had a difficult 2022, and Apple stock dropped along with the rest. Rising interest rates, increasing inflation, and fears of a 2022 recession – or perhaps a market crash – are keeping consumers away from big-ticket items like Apple’s costly iPhones.

Year-to-date, Apple stock is down more than 25 percent, but that’s actually good news for investors who want to buy Apple stock now. Apple was the first company to hit a market cap of $2 trillion in August of 2020, and in January 2022, it was the first company to reach a $3 trillion market cap.

As of mid-June, Apple’s market cap is closer to $2.2 trillion. It is trading near its 52-week low currently and its price-to-earnings ratio is roughly 22x. Certainly, Apple stock may see additional declines if market conditions continue on their current path, but no one doubts that Apple stock will recover.

Long-term, Apple stock is expected to deliver impressive growth as Apple continues to bring innovative products and services to consumers. However, most analysts believe that investors won’t have to wait five years or more to see meaningful gains.

The average 12-month price target is $187.90 per share, with a high of $219.94 and a low of $145. Any of these 12-month scenarios would be a win for those who buy Apple stock now.

Is Apple Stock A Buy? The Bottom Line

The best time to buy Apple stock was before the 2007 launch of the iPhone. It’s too late for new investors to do that, but the next-best time might be now.

First, Apple is diving into fintech with new services that meet consumer demand. These services will further cement users’ loyalty to the Apple brand, as none are available outside of the Apple ecosystem.

Second, the price of Apple stock is relatively low. That’s not a guarantee that it will increase in the next month or the next quarter, but there is little doubt that Apple stock will go up sooner or later. When it does, those who buy at today’s relatively low price will realize the biggest gains.

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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.