Reasons To Buy Apple Stock Now: Not only is Apple one of the world’s most iconic consumer brands, it’s also one of the most heavily traded stocks on the planet.
Indeed, the company has a market capitalization of just under $3 trillion, and its products are beloved by consumers across the globe. Apple is a true innovation powerhouse and can command premium prices for the goods it sells.
However, with concerns surrounding a looming recession not uncommon, many customers are wary about spending money on expensive items, especially since inflation appears to be wiping out wage gains and savings these days.
In fact, it can be difficult for many shoppers to justify spending money on new luxury items like iPhones and MacBooks. And as Apple products are still considered discretionary goods by some people, this can cause difficulties in an economy where consumers are spending less while waiting out these uncertain times.
But regardless, Apple is still a top-performing business – so here are three reasons why you should buy this quality stock today.
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Apple Is More Than Just A Smartphone Maker
Despite remaining the company’s most important product in terms of both revenue and profit, the Apple iPhone has become less of a revolutionary device and more of an evolutionary one in recent years.
But with the possibility of declining sales on the horizon, Apple has been hard at work innovating new products with a view to opening up new markets.
One potential opportunity for Apple would be its entry into the electric vehicle market.
Rumors have been swirling for a long time that Apple is working on an electric car, and, although the company has never confirmed this, it seems increasingly likely that an Apple-branded automobile could be about to hit the market in the not-too-distant future. Given Apple’s history of innovation and its strong brand recognition, it’s reasonable to believe that an Apple car would be a success if it does indeed come to fruition.
Another avenue for growth lies in Apple’s services business too. This segment includes offerings such as Apple’s data storage solution iCloud, as well as the App Store and iTunes, to name but a few.
Moreover, the services division has been expanding rapidly during the third quarter, increasing 70% from $11.5 billion in 2019 to $19.6 billion today. And with more than 1 billion active devices now using these services, there’s massive potential for more growth further down the line.
This segment is important to Apple because it generates high-profit margins and helps keep users locked into its ecosystem.
On the margins front, services are a bright spot for Apple since they produce a much higher profit fraction than the company’s hardware offerings. For example, in the last quarter, Apple turned in a gross margin of 72% on its services revenue of $19.6 billion, while it only made 35% off of its products sales at $63.4 billion.
What’s more, with recurring revenue from subscriptions, services are a more predictable and stable source of income than one-time product sales.
Apple has also been aggressively marketing Apple Pay as a more secure and convenient way to pay for goods and services online and in physical stores.
The company is working with major financial institutions to encourage the use of Apple Pay, and Apple has partnered with retailers to provide exclusive deals and discounts to Apple Pay users. All of these efforts could lead to significant growth in Apple Pay usage, which would be a major boon for the company.
A Wide And Growing Moat
In terms of keeping users locked in, services play a key role by providing value that can only be found within the Apple ecosystem. For example, only iPhone users can access the App Store or iTunes library, and, if you want to use those things, you’ll need an iPhone handy – and preferably one you own yourself.
In this respect, the strength of Apple’s ecosystem acts as an economic moat for the business. It ensures customers receive a high-quality experience, and, crucially, it also makes it very difficult for competitors to break into its market too.
In fact, there are many other reasons why Apple enjoys such a strong moat compared to its peers. Its brand profile is second to none, which enables it to pursue a premium pricing strategy that other companies in the space simply couldn’t get away with.
Furthermore, despite the severe logistical problems that have hampered worldwide trade these last few years, Apple’s supply chain management is normally exceptionally agile and dynamic, allowing the firm to efficiently deliver high-quality products to customers quickly and at scale.
Record Breaking Revenue
After a third-quarter earnings report that saw unprecedented sales of $83.0 billion, it would be remiss not to talk about Apple’s extraordinary financial performance of late.
Indeed, Apple could be on track to surpass 2021’s record showing, possibly bringing in near to $100 billion of net income for the full year if the fourth quarter continues as expected.
On top of that, Apple has been generous in returning capital to its shareholders too. In the third quarter, the company gave back over $28 billion in stock repurchases and dividends and has been increasing its distribution payout for nine consecutive years now.
Wrap-up
The iPhone is not only Apple’s most important product, it’s also one of the most important products in the history of consumer electronics. It’s changed the way we communicate and consume media, and, for many of us, the iPhone is an extension of our lives and our personality.
However, Apple isn’t dragging its feet when it comes to preparing for the future.
The company has a strong ecosystem of both products and services, giving customers plenty of reason to stay with Apple for as long as they can.
And for investors, it’s one of the most rewarding businesses on the planet.
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