As the world's most valuable company with a market cap of $2.7 trillion, Apple (AAPL 2.07%) has a long history of offering investors consistent gains. The company has achieved record highs and has become one of the most dominant figures in tech.
However, 2023 hasn't been easy. Apple's quarterly revenue has repeatedly slipped as macroeconomic headwinds have caught up with its product sales.
Apple is making headway in high-growth markets like artificial intelligence (AI) and virtual/augmented reality (VR/AR), but it will take time to see a solid return on its investments. So before you load up on Apple shares, it's wise to consider the positives and potential negatives of its business.
Here's the bear case versus the bull case for Apple stock.
Bull: Introducing AI features across its product lineup
Apple held its annual September event on the 12th, debuting the iPhone 15, the next generation of the Apple Watch Ultra, and an update to the AirPods Pro. The showcase gave more clues to the company's AI strategy, gradually sprinkling the technology across its lineup. While tech giants like Amazon and Microsoft have rushed to share their ventures into AI, Apple has taken a quieter approach.
Rather than speak directly about AI, the iPhone company is using its research on the technology to improve user experience with its products. Siri is now 25% more accurate, while Apple Watch users will soon be able to use finger gestures to control aspects of the device.
The AI-enabled updates shared at this month's event build on ones introduced earlier this year. In June, Apple announced an overhaul of the iPhone's autocorrect feature, which uses a language model similar to OpenAI's ChatGPT to learn texting styles. Meanwhile, the AirPods Pro will automatically turn off noise canceling when the wearer engages in conversation.
NASDAQ: AAPL
Key Data Points
Apple's use of AI aligns with comments from CEO Tim Cook. In an interview with Reuters in August, the executive talked about the company's research and development spending increasing by $3 billion in the third quarter of 2023, hitting close to $23 billion. Cook said an increase in generative AI research primarily drove the jump.
Apple holds leading market shares in multiple product categories thanks to immense brand loyalty from consumers. Its stature in tech could see it bolster public adoption of AI, boosting sales as it attracts new customers. Other companies like Amazon are focused on the business sector, but Apple could cash in on consumer use of AI.
Bear: Repeated revenue declines
Apple shares have tumbled 10% since Aug. 1. Stockholders have grown weary after the company posted its Q3 2023 results. The period represented the third consecutive quarter of revenue declines, falling 1% year over year. Marketwide challenges have caused reductions in consumer spending on tech, with three of Apple's four product segments experiencing slips in revenue.
However, macroeconomic headwinds won't last forever, and the good news is Apple is continuing to outperform the competition. According to Counterpoint Research, smartphone shipments fell by 24% in Q2 2023. As a result, market leaders like Samsung and Motorola suffered sales declines of 37% and 17%. However, the same period saw Apple's iPhone sales fall 6%, enabling it to increase its market share from 52% to 55%.
Apple performed similarly amid PC market challenges. Data from IDC shows PC shipments dipped 13% in Q2 2023. Dell, Lenovo, and Acer reported shipment declines between 18% and 22%. Meanwhile, Apple's MacBook shipments actually increased by about 10% in the quarter.
Apple isn't out of the woods with economic challenges and could continue to see revenue declines for the rest of the year. Therefore, an investment in its stock should be held for the long term. The company could profit significantly in the coming years from easing inflation and its expanding position in AI. The recent dip in its share price makes Apple an attractive investment. However, prospective investors will need to be patient if a potential recession hits and hold for five to ten years minimum as the company recovers.
