Apple (NASDAQ: AAPL) It is not the same company that it was five years ago. For one thing, it no longer sees sales of its iPhone devices as the main driver of its future. Some investors have taken Apple’s change in strategy towards services and other sources of income as a problem for the company, but that could not be further from reality.
For investors who are skeptical of Apple’s strength as a long-term investment, let’s take a look at three reasons why you should consider adding Apple stocks to your portfolio and sticking with it for the long term.
Image source: Apple.
1. Apple will withstand current (and future) economic storms very well
Billionaire and famous investor Warren Buffett has said that Apple is “probably the best business I know of in the world.” What makes Apple stand out?
First, consider how much cash the company has. At the end of the second quarter, Apple had $ 193 billion in cash available. That cash will not only help you continue to make your dividend payments in the future (and increase them), but it also gives Apple a massive advantage over other tech players.
The company has been able to invest its enormous amount of money in things like producing content to help increase subscribers to its Apple TV + service and buying smaller companies to help maintain its innovative edge.
Cash not only helps Apple continue to expand its business in new ways, but it’s also a huge advantage over smaller technology companies when it comes to overcoming the current economic climate we find ourselves in. While others may be reeling from the COVID-19 effect at its top and bottom line, Apple can weather this recession better than most. The Mac maker won’t come out unscathed, but it will be better able to handle financial pressure due to its strong cash position.
2. Devices and services are still a winning combination.
Apple may no longer report how many iPhones it sells in a quarter, but that doesn’t mean the device isn’t an integral part of its long-term business strategy. IPhones are one of the best ways for consumers to take advantage of Apple’s growing ecosystem, and the device still helps generate massive revenue.
Note that the tech titan’s service revenue, which includes Apple TV +, Apple Music, Apple News +, etc., grew 16.6% in the first quarter to $ 13.3 billion. That income comes mainly from users who sign in from their iPhones to access these services. With nearly 1 trillion active iPhones estimated to be in use worldwide, Apple’s opportunity to offer its users new services is unmatched.
And it doesn’t end with services. Apple’s wearable technology is one of the company’s fastest growing revenue segments, with an annual increase of 22.5% in the last quarter. AirPods are one of the best-selling wireless headphones on the market, and your Apple Watch is the best-selling smartwatch. These devices are, in a sense, an extension of iPhones.
There is also evidence that Apple could experience a sales boom when the company launches a 5G-enabled iPhone. 5G will bring even faster and more reliable cellular connectivity, and the new technology is expected to spur what’s called a “supercycle” of updating iPhone users exchanging their current devices for 5G-enabled versions. CCS Insights estimated that 5G devices will account for 58% of smartphone sales in 2024.
Although Apple’s iPhone is no longer at its peak, the company’s opportunity to take advantage of it with services, portable devices, and 5G remains highly significant.
3. Apple has not finished innovating
There’s no way of knowing what Apple’s next big tech device will be, but there is mounting evidence that the company is exploring augmented reality (AR) glasses, potentially called Apple Glasses. Apple has been very focused on AR in recent years and has increasingly integrated technology into its devices and applications. Creating a specific device that focuses on AR would play well with Apple’s current approach.
Apple could launch Glasses as soon as possible next year, but no one knows for sure. Gene Munster, a former notable Apple analyst and co-founder of Loup Ventures, recently said that “Apple’s track record with wearable devices, dating back to the EarPods, gives us confidence that Apple will lead the way in the eyewear category. augmented reality emerges in the coming years. ” Apple Glasses, which could fetch around $ 499, would likely provide a massive boost to sales of its devices, and could also help provide more service opportunities through AR-related apps.
Of course, Apple Glasses is just a rumor right now. But the point here is that investors should not think that Apple has finished creating new products or services for its users. Sure, it can move slower than smaller tech companies. But Apple has always moved at its own pace when it comes to launching new products and services, and it’s almost always worth the wait.
If it’s good enough for Buffett …
With the current recession underway, many investors are looking for places to put their money that have great long-term potential, but are also relatively safe. Apple’s massive cash accumulation, its unrivaled user base, its long list of best-selling products, and its commitment to shareholders make this business an obvious purchase for many investors.
Sure, the company will experience stock price changes like any other stock, but in the long term, Apple will be able to overcome these uncertain times and continue to monitor long-term growth. I agree with Buffett: it would be difficult to find a better business anywhere.
