Apple stock has seen its ups and downs of late. The COVID-19 pandemic triggered a tech boom where countless stocks skyrocketed as home-bound consumers invested in home offices and entertainment. This prosperous period led Apple's (AAPL -0.06%) stock to reach an all-time high of $180.68 on Jan. 3, 2022.
However, more recent economic challenges have slowed consumer spending, dragging countless tech stocks down. Apple shares fell 26.8% last year. Yet, the stock has soared 22% since Jan. 1 as the market shows signs of recovery. But it remains down 13% from the all-time high it reached last January.
Here's why now is the time to buy Apple stock after a dip from its all-time high price.
Apple is fortifying its iPhone business
The iPhone was responsible for 52% of Apple's revenue in fiscal 2022, earning $205.5 billion and rising 7% year over year. So Wall Street justifiably grew uneasy when increased COVID-19 restrictions in China strained the factory producing about 70% of all iPhones last November. Apple's stock subsequently fell 15% from Oct. 31, 2022 to Jan. 1, 2023.
However, the company has rallied investors this year thanks to several moves to strengthen its iPhone business. Apple plans to move production out of China in the coming years, with a large focus on India. In fact, the biggest producer of iPhones, Foxconn (or Hon Hai Precision Industry) will invest $700 million to speed up manufacturing in India.
Moreover, multiple Bloomberg reports have revealed Apple will maximize iPhone profits by utilizing more in-house components in the future. The company reportedly plans to shift away from costly partnerships with Samsung and LG for its iPhone displays, using custom versions as early as 2024. Apple is expected to do the same with its WiFi and Bluetooth chips, developing one which combines both capabilities to replace current chips from Broadcom and Qualcomm.
Apple is a diversified company, but when it comes to revenue, it needs to protect its cash cow, the iPhone. Recent moves to further boost its smartphone business favor its long-term outlook.
A lucrative future in digital services
In addition to strengthening its iPhone segment, Apple is further guaranteeing its long-term success by expanding its digital services business, allowing it to lean less on its product revenue.
In fiscal 2022, services, including platforms like Apple TV+, Music, iCloud, Fitness+, and Arcade, achieved $78.1 billion in revenue, rising 14% year over year -- double the iPhone's growth. Even more promising, services' profit margin hit a lucrative 71.7%, while the same metric for products came to 36.3%.
Apple's venture into services has led it to gain the second-largest market share in music streaming, with Music's 15% only behind Spotify's 31% and Amazon Music's 13%. According to Grand View Research, the global music-streaming market was valued at $29.5 billion in 2021 and is projected to expand at a compound annual rate of 14.7% through 2030. In addition to growth from video streaming, fitness apps, and gaming, Apple's various services will likely provide substantial gains for years.
Moreover, Apple services are further boosted by the iPhone's leading 24.1% market share in all smartphones, a figure that has soared over the years and was 11.7% in the first quarter of 2019. The company has strategically designed its services to be the optimum choice when using an iPhone, which has boosted their mass adoption.
Apple shares are down 13% from their all-time high. However, the company has a lucrative future thanks to improvements in its iPhone business and promising growth in digital services. Apple's forward price-to-earnings ratio decreased 15% over the last year to 22, amplifying its stock's value and making it a screaming buy right now.
