Apple (AAPL 0.02%) is truly in a league of its own. It's the only company in the world with a market cap of over $3 trillion and has an exceptionally loyal customer base. Interbrand recently crowned Apple as the best global brand for the 11th consecutive year.
Its stock has been a big winner for investors through the years, too. Over the last 10 years, Apple's share price has increased by nearly 10x. The stock is up close to 50% this year. But should you buy Apple stock in 2024?
Why consider Apple stock?
If I had to pinpoint the top reason to consider buying Apple stock, I'd probably go with dependability. You can count on the company to generate strong revenue and profits year after year. The aforementioned customer loyalty and brand strength are key reasons why.
Apple's active installed base for its devices reached an all-time high in the quarter ending Sept. 30, 2023. We're not talking about just for iPhone, either. CFO Luca Maestri pointed out in the latest quarterly update that the record numbers were "across all products and all geographic segments."
The massive number of installed devices worldwide helps Apple make more money through its services, such as the App Store, Apple Music, and Apple Pay. Unsurprisingly, the company's services revenue also achieved an all-time high in the latest quarter.
That leads me to another reason to seriously consider buying Apple stock: The company generates more cash than it knows what to do with. Apple's cash stockpile totaled nearly $62 billion at the end of September. In addition to this amount, Apple had another $100.5 billion in non-current marketable securities.
What makes those numbers especially impressive is that they're so big, even after Apple returned a boatload of money to shareholders. Over the 12 months ending Sept. 30, 2023, the company paid $15 billion in dividends. It also spent over $77.5 billion on stock buybacks. In the latest quarter alone, Apple returned a total of nearly $25 billion to shareholders.
Apple also continues to invest heavily in new products and services that could lead to more growth in the future. CEO Tim Cook is particularly excited about the opportunities for the new Vision Pro mixed-reality device. He has said that the introduction of the product "marks the beginning of a new era for computing" and that Vision Pro is "unlike anything created before."
Apple's downsides
As great as Apple is, the company and its stock have some downsides. Arguably, the biggest one is valuation. Shares currently trade at 29.5x expected earnings. That's a premium multiple that most investors would only think is warranted for companies that are delivering exceptionally strong sales growth.
Unfortunately, Apple's sales growth recently has been weak to nonexistent. In its latest quarter, the company's revenue declined by 1% year over year. There's no guarantee this situation is going to change dramatically anytime soon.
Apple just suspended U.S. sales of two models of its Apple Watch because of a patent dispute with Masimo. While the company held off as long as possible to capture as many sales as possible before Christmas, it's not a positive development.
There's also considerable uncertainty about how big of an impact Apple's new products will have. CNN referred to Vision Pro as "Apple's riskiest product launch in years." The mixed-reality device is also the first new major device for Apple in seven years.
Should you buy Apple stock in 2024?
Let's return to our original question: Should you buy Apple stock in 2024? The cop-out answer is that only you can make that decision. It's your money to invest. I won't weasel my way out of the question, though -- I'll give you my opinion.
It's important for me to first disclose that I've been an Apple shareholder for a long time. Apple ranks as my largest position in an individual stock (I do have bigger stakes in some exchange-traded funds).
I don't plan on selling any of my shares of Apple. My view is that the company remains one of the best-run businesses on the planet with a solid moat.
That said, I probably won't buy Apple stock in 2024. It's not just because of my current large position size, although that's a factor in my thought process. The bottom line for me is that I think other stocks offer a better risk-reward proposition than Apple does, especially considering its high valuation. To paraphrase Warren Buffett, Apple is a wonderful company -- but it doesn't trade at a wonderful price right now.
