There's arguably never a bad time to own a stake in Apple (AAPL +2.65%). It's not only the world's biggest and most profitable company, it's also one of its most reputable corporations. It's going to be a juggernaut for a long, long time.
If the market's rekindled bullishness of late marks the beginning of a full-blown bull market, though -- and it very likely does -- that's particularly good news for current and prospective investors. See, Apple stock tends to lead the way in a bullish environment. It's likely to do the same the next time around too, for three specific reasons.
1. The next wave of iPhone upgrades is building
Investors keeping close tabs on Apple probably know sales of the recently released iPhone 15 have been decent, but far from thrilling. It's getting due credit for snapping a multi-quarter decline in worldwide smartphone sales. It's not a game-changer, though; sales in China have been notably lackluster.
This modest demand, however, isn't necessarily a sign that the iPhone is past its prime. It's just as arguable that many current cost-conscious iPhone owners are waiting for the iPhone 16, which is expected to be unveiled late next year. With a bigger battery, better camera, faster processor, and more memory -- just to name a few likely differences -- the technological leap between it and the iPhone 15 will be wider than the difference between the iPhone 15 and the iPhone 14.
Better yet, this next iteration of the popular device will be released to a market that's more than ready for it.
See, with the iPhone upgrade cycle now stretched to an estimated record of 4.4 years, analysts with Morgan Stanley suggest the coming year could be a tremendous one for Apple due to "pent-up demand from consumers deferring their iPhone purchase from FY23 [ending in September]." Indeed, should ongoing economic progress spur a new bull market, Morgan Stanley says people may end up splurging on an iPhone 15 between now and then, rather than holding out for the iPhone 16.
Either way, Apple wins.
2. Apple is getting very, very good at selling services
There was a time several years ago when Apple was an iPhone company that also sold a few other things. It didn't get serious about services -- content, apps, software -- until 2018.
What a difference five years has made! Although the iPhone is still the company's single biggest source of revenue, the services segment is a respectable second, accounting for about one-fourth of its sales.
Profit margins are markedly higher on digital services too, with 70% of this business being converted into operating income. Although Apple doesn't divulge product-specific profitability levels, it's conceivable that services could add nearly as much to the bottom line as the iPhone itself does. Indeed, given enough time, digital services could become the company's chief breadwinner, making the iPhone itself a means to a bigger end.
And Apple's gotten very, very good at making the iOS operating system incredibly "sticky," and very easy to spend money within.
How sticky? The company says there are now more than 2 billion iOS users, with reportedly around 1.5 billion of them being iPhone owners. Once someone becomes an iPhone user, they tend to stick with the familiar platform.
Meanwhile, data compiled by Asymco suggests that the average iPhone owner spends more than $10 per month on apps and digital services, trouncing Android's comparison of an average of only $1.40 per month. Those figures jibe with numbers from app industry data repository Business of Apps and GlobalStats' StatCounter, too.
As is the case with the iPhone itself, a bull market rooted in economic strength could very easily spur even more spending on apps and subscription-based digital content among iPhone owners.
NASDAQ: AAPL
Key Data Points
3. It's still a premier brand and stock
Last but not least, Apple is a great bull market buy simply because the name itself still turns heads after all these years. Brand-management outfit Interbrand rates Apple as 2023's single best global brand, mirroring the same call made for this year by marketing analytics company Kantar. Apple's logo itself is also one of the planet's most recognizable corporate insignias.
These accolades don't come with any monetary awards. In some regards, though, they do have monetary value. It's easier to sell a product when most of the world already knows and loves the company making it. And it's easier to sell a newer version of a product the world also already knows and loves. Many of its customers are even willing to defend Apple's reputation when merited.
This reputation does more than help maintain pricing power in the smartphone marketplace. It extends to Apple shares as well. The stock is not only one of the planet's most widely owned equities, it tends to perform very well during bull markets when investors are seeking out tickers with lots of upsides but little downside. For perspective, while the S&P 500 rallied nearly 100% between March 2020 and late 2021, Apple soared on the order of 200%. It's also gained 50% just since the end of last year, versus the S&P 500's more modest gain of 18%.
There's no guarantee Apple shares will repeat the feat during the next full-blown bull market. Betting against Apple's market leadership, however, certainly doesn't seem like the right move to make.
