Wall Street always seems to have one eye on Apple (AAPL 0.04%) as the world's most valuable company, with a market cap of $2.9 trillion. The company has made countless headlines this year while making plans to move manufacturing out of China, unveiling its first virtual/augmented reality (VR/AR) headset, and expanding in fintech with the launch of a savings account.
Since the start of 2023, Apple shares have soared roughly 50%. The company's reputation for consistent growth has rallied investors, with excitement growing as its market cap inches closer to $3 trillion. With a solid long-term outlook, it's not a bad idea to learn more about this tech giant and consider investing.
Here are three things about Apple that smart investors know.
1. Apple is the king of consumer tech
Apple has attained massive dominance in consumer tech with the help of its almost unrivaled brand loyalty. The first-generation iPhone debuted in 2007 and continues to offer reliable growth, with the segment's revenue rising 7% year over year in fiscal 2022. The most attractive part of the company's smartphone business is consistent consumer demand, even under challenging conditions.
After macroeconomic headwinds in 2022, the entire tech market started the year in a slump. Smartphone leaders Samsung and Xiaomi experienced shipment declines of 19% and 24%, respectively, in the first quarter of 2023. But the same period saw Apple's iPhone segment report a 2% rise in revenue, proving the resiliency of its business.
NASDAQ: AAPL
Key Data Points
The popularity of the iPhone has become the company's biggest asset when touting its other products and services. The connectivity among all of its devices has paved the way for it to achieve leading market shares in tablets, smartwatches, and headphones. Meanwhile, digital services like Apple TV+, Music, Fitness+, and more have become the company's second-highest-earning segment.
Apple's past success when entering new product categories bodes well for the long-term potential of its recently unveiled Vision Pro headset, which combines VR and AR. An investment in the tech giant could be an investment in the future leader of this quickly growing $31 billion market.
2. It's quietly making inroads into AI
Tech companies like Microsoft, Alphabet, and Advanced Micro Devices are littering their earnings calls with the term "artificial intelligence" as they assure investors of their intent to cash in on this lucrative industry.
Apple has so far steered clear of directly calling any of its technologies artificial intelligence (AI). Instead, the company is focused on talking up new features it is developing with AI models and machine learning.
Avoiding the references to AI isn't a bad idea, since it prevents Apple from being lumped into the same category as other companies, which could lead to stock volatility in the future. It is skillfully protecting itself from being directly compared to other AI companies while enhancing its products with the technology.
For instance, at its Worldwide Developers Conference on June 5, Apple unveiled several new AI features across its lineup. Improvements to the iPhone's autocorrect use a model similar to ChatGPT to learn how users text and type. Meanwhile, AirPods Pro will automatically turn off noise canceling when the wearer engages in conversation.
As one of the biggest names in consumer tech, the company manufactures the devices that will get AI into the hands of the public. Consequently, it could play a major role in the development of the sector.
3. Apple's stock is slightly expensive
Apple's stock has experienced a bull run this year. There haven't been many solid reasons for the rally, with investors seemingly caught up in the hype of the company hitting a $3 trillion market cap. In fact, it has reported revenue declines for two consecutive quarters, falling 5.5% in the first quarter and 2.5% in the second.
As a result, Apple's price-to-earnings ratio (P/E) has risen 54% since Jan. 1 and currently sits at 33. A P/E of less than 20 is often considered a good value, putting Apple's stock at a slightly expensive price point.
The good news is the shares are still cheaper than many of its peers. Among the Big Five of tech, the chart below shows only Alphabet has a better P/E than Apple.
Data by YCharts.
A recent rally may have reduced the value of Apple's stock, but the longer you hold, the less that will matter. The company's shares have soared roughly 320% over the last five years alone. With growing positions in AI and VR/AR, the company is likely to continue on its current trajectory.
