Love it or hate it, Apple stock (AAPL) – Get Apple Inc. (AAPL) Report has soared to new highs once again, amassing astounding cumulative gains of nearly 500% over the past five years. The market seems to understand that the Cupertino company is the big player across nearly all sub-segments of consumer tech, and it has rewarded the stock by bidding it up to a total market cap of over $2.5 trillion.
Today, the Apple Maven discusses why Apple’s position of “biggest wig in tech” probably justifies buying shares, even at a record price of $160.
(Read more from the Apple Maven: Apple Car Drives AAPL To All-Time High And Most Valuable Stock)
Apple at the center of it all
Apple stock reached historical peaks and reclaimed the position of most valuable in the world for three most likely reasons: (1) high expectations for iPhone sales in the holiday quarter; (2) opportunities in mixed reality through the metaverse; and (3) autonomous EV. There is one common theme that connects these three factors: Apple is at the center of nearly all relevant trends in consumer tech.
Start with the first item. While the smartphone seemed to be heading towards the maturity and declining stages of its lifecycle a few years ago, growth in unit sales has picked up recently. The most likely catalysts were better cameras, more applications, and the transition to 5G mobile technology.
But make no mistake: the recent turnaround in smartphone sales was not sparked by innovations introduced by Huawei or Samsung. Apple’s entry into the 5G era with the iPhone 12 is what most likely caused global smartphone shipments to rise by an estimated 11% in 2021 vs. a decline of 10% in 2020. In fiscal 2021, iPhone revenues jumped 39% vs. a decline of 15% in fiscal 2019, suggesting that Apple has single-handedly dragged the smartphone industry out of the gutter.
Regarding AR and VR (augmented and virtual reality), Morgan Stanley has recently introduced the idea that Apple will likely be the main gatekeeper of the metaverse. The research company suggested that the 3D virtual environment will only become mainstream “if or when Apple enters the space”. In other words, the Cupertino company’s future mixed reality products have a good chance of becoming the iPhone-equivalent of the next generation.
Lastly, rumors around the Apple Car have heated up lately. Chatter suggests that Apple will come to market with a fully autonomous car by 2025. Morgan Stanley again weighed in, arguing that Apple’s entry into the EV (electric vehicle) space will be the bear case for the rest of the sector. The key reason:
“A car without steering wheel or pedals must be a shared service and not an owned car. […] We do not believe consumers will own title to a fully autonomous car, but will engage in the service as a subscription or transport utility.”
This is yet another case in which Apple might not be the first to market, but the most relevant player that reshapes it. When it comes to consumer tech products and services, Apple as the key gatekeeper has become a common occurrence. For evidence, just look at Snap’s financial performance following Apple’s iOS policy change on privacy.
Buy AAPL at a peak
I have written plenty about how AAPL tends to offer the best returns when shares are bought on the dip. But this is not to say that the stock should only be owned if it is in a drawdown. Apple’s position as the most important player in consumer tech supports, in my opinion, the bull case at $160 per share.
We have recently asked Twitter: of the three likely reasons why Apple stock has rallied in the past several days, which are you most excited about? iPhone sales in the holiday quarter; the metaverse; or autonomous vehicles? Feel free to chime in below!
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)