Even a mega-cap juggernaut like Apple (NASDAQ: AAPL) isn’t immune to the occasional market-driven or company-specific downturn. It’s just that it doesn’t happen very often. And when it has, it has turned out to be a reliable buy opportunity time and time again.
This year has been no exception. Apple shares slipped into correction mode in both March and May only to emerge to new record highs. It is shaping up to be the same story for the most recent pullback. After reaching an intraday high above $157 on September 7th, Apple dipped back below $140 by early October. A couple weeks and another successful marketing event later, Apple shares are on the run once more.
Apple has historically been a no-brainer when it comes to buying the dip and yet it somehow always surprises us. Throughout the years there have calls of slowing growth and competitive concerns that have only made the technology innovator stronger. There’s no reason to believe that pattern won’t repeat itself.
What are Apple’s Newest Products?
A major reason why investors repeatedly buy the dip in Apple stock is because the company is an innovation machine. New tech gadgets and upgrades of existing products are consistently introduced to the world through scheduled presentations which are major events in and of themselves. This expands Apple’s dominant ecosystem and creates new revenue streams that drive growth.
At this week’s event, Apple unveiled several new items. The new MacBook Pro comes complete with a camera similar to what is on the iPhone and in 14-inch and 16-inch varieties. Built into the laptops are Apple’s two new semiconductor chips, M1 Pro and M1 Max, which mark a major step in advancing its in-house chip platform instead of relying on external suppliers.
Apple also introduced the latest iteration of the wildly popular AirPod wireless headphones which have a new look, longer battery life, and magnetic charging. Rounding out Apple’s latest show and tell was a new lineup of colorful HomePod mini smart home devices and the $4.99 per monthly voice plan for Apple Music.
It is Apple’s unparalleled ability to churn out tech devices at (relatively) affordable prices that has allowed it to not just stay relevant in a fast-evolving tech world but deliver robust earnings growth year after year. Knowing there is always more in the pipeline gives investors the confidence to buy the stock on any weakness.
What are Apple’s Future Growth Drivers?
Apple certainly isn’t resting on its laurels after producing hit product after hit product. From its early days to today, the company stays ahead of the curve by getting involved in the biggest trends in technology. While Apple smartphones, laptops, watches, and related services still have room for growth (especially in emerging markets) eventually they will give way to a new wave of innovations.
The next layer of growth could come from artificial intelligence- (AI) based products and services. With a former Google executive now leading that division, Apple has set out to push app developers to incorporate AI and machine learning. Its Core ML 2 API and Create ML offerings are helping developers with things like text interpretation and photo recognition. There will undoubtedly be more AI-based tools introduced to developers and these capabilities built in to existing and future Apple products.
Apple’s other major long-term growth opportunities include virtual reality (VR) technologies and Internet-of-Things (IoT). In the VR space, Apple has been busy scooping up startups with expertise in VR hardware, software, and gaming to enhance its capabilities in this high-growth market. It is also expected to be major player in the IoT space as consumers demand more and more connected devices to power their homes and offices. Smart appliances and self-driving cars are just two major growth opportunities.
Is it a Good Time to Buy Apple Stock?
Since Apple’s October keynote event, several analysts have reiterated their bullish sentiment on the stock. One firm (Evercore ISI) even took the opportunity to upgrade Apple shares to a buy. It’s easy to see why the Street continues to favor Apple despite its bulging $2.4 trillion market cap.
In a rebounding consumer spending environment, people worldwide have become more comfortable with dishing out money to get the latest Apple products. And with the holiday shopping season still, ahead, Apple products new and old will be on the wish lists of people young and old.
The decision to buy Apple stock here depends on the investor’s time horizon. Short-term traders will probably have an opportunity to get the stock for less given the recent 4-day, $10 run that has put the stock outside of the upper Bollinger band.
Long-term investors could try to time it a bit better as well. Though, it shouldn’t make much of a difference with a 3-, 5-, 10-year or more holding period. Apple’s 27x forward P/E ratio may look pricey, but given the historical performance and multiple growth levers ahead, now is as good of a time as any to bite into some Apple shares.
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