Apple boasts a commendable dividend yield, rendering it a favorable long-term investment with no intention of divestment. Should booking volumes and delivery times exceed expectations, coupled with stable iPhone production, Apple’s stock price will undergo a period of rejuvenation.
Undoubtedly, Apple stands as a fortress-like company. It wields substantial market price power, enabling it to maintain an impressive gross profit margin of 44.5%, even amid overall revenue decline.
Over the past fortnight, Apple’s stock price has experienced a continuous decline. A significant factor contributing to this decline is market apprehension regarding the sustainability of impressive iPhone 15 sales. Furthermore, consumers perceive the technological advancements in Apple’s new products as inadequately conspicuous, while uncertainties surrounding the global macroeconomy persist.
The pivotal factor determining sustained revenue growth for Apple lies in its long-term success in the realms of smart wearables and services. Certain Wall Street institutions posit that if the expansion into emerging markets like India proceeds as scheduled, Apple will conquer new frontiers, propelling its performance and stock price towards prosperity.
According to analysts, new product pre-sales have surpassed expectations, particularly with the iPhone 15 series. In the Chinese market alone, JD.com’s booking data indicates that, as of September 18, bookings on their platform have exceeded 3 million. Similarly, the Tmall platform reported replenishing stock nine times in a row on the night of the iPhone 15 pre-sale, resulting in a revised delivery date of within 60 days. Notably, seasoned U.S. stock investor Chen Da revealed his own iPhone 15 pre-order and expressed anticipation for its arrival in October.
Goldman Sachs recently released a report attesting to the robust demand for high-end models of the iPhone 15. In a report to clients on September 17, U.S. investment bank Wedbush Securities’ analyst Daniel Ives stated, “The high-end models, iPhone 15 Pro and Pro Max, have exhibited strong performance, with overall reservations for the iPhone 15 series surpassing last year’s figures after the release of the iPhone 14, marking a 10%-12% increase.”
Daniel Ives further highlighted the exceptional performance of iPhone 15 Pro Max, particularly in the United States, China, India, and parts of Europe, which indisputably bolsters Apple’s standing. Chen Da noted, “The fourth quarter consistently emerges as the peak season for iPhone consumption. During this period, numerous festivals are celebrated both domestically and internationally, coinciding with the time when individuals receive their most substantial bonuses and benefits, underscoring the importance of fourth-quarter sales.” Additionally, the average delivery time for iPhone 15 Pro Max stands at 5 to 6 weeks, the lengthiest among all models launched in the past seven years. This clearly indicates the popularity of bookings; however, some analysts caution that the extended delivery time may stem from limited camera module component supplies.
Morningstar Senior Analyst Brian Colello emphasized that it remains to be seen whether macroeconomic concerns will dampen demand for new products.
Wall Street short-sellers estimate Apple’s fair value to be $150. Mizuho Securities’ Jordan Klein, managing director of technology, media, and telecommunications industry trading, noted that nearly all hedge funds have recently engaged in shorting Apple. Technologically speaking, consumers believe that Apple’s new products lack innovation and resemble “toothpaste”-like upgrades. In stark contrast, Huawei’s release of the HUAWEI Mate60 flagship series on August 29 sparked fervent discussions in the market. Moreover, both Mate60 and iPhone 15 commence at a price of 5,999 yuan, posing the question of whether Huawei will impact Apple. Brian Colello acknowledged that the Chinese market accounts for almost one-fifth of Apple’s revenue and currently serves as Apple’s largest stock and incremental market. The resurgence of Huawei’s high-end models is anticipated to challenge the iPhone 15’s market share in China. However, the volume of Mate60 production in the coming months remains uncertain, thus exerting influence.
Two weeks prior to its launch, the capital market and Apple’s stock price exhibited caution. From September 1 to September 12, Apple’s stock price suffered a decline of 6.16%. On the day of the press conference, Apple closed down 1.71%. As of September 21, Apple’s latest closing price amounted to $173.93. Brian Colello further asserted that the decline in stock price is not solely attributable to the Chinese market but also due to overvaluation. Brian assigns a fair value of $150 to Apple’s U.S. stock, implying that Apple’s current price of $173.93 allows for approximately 13% adjustment.
Chen Da’s estimated valuation aligns with Brian Colello’s assessment. He believes that Apple’s stock price has been inflated due to the absence of competitors in the high-end mobile phone market resulting from the United States’ suppression of Huawei in recent years. Moreover, Apple’s ongoing share repurchases have propelled its stock price into a higherrange. Chen Da predicts that once competitors like Huawei regain their footing, Apple’s stock price may experience a correction.
Apple’s stock price has faced recent declines due to concerns about the sustainability of iPhone 15 sales, perceived lack of innovation in new products, and macroeconomic uncertainties. However, pre-sales data and analyst reports indicate strong demand for the iPhone 15 series, particularly the high-end models. The performance in key markets like the United States, China, India, and Europe is expected to bolster Apple’s standing. Nonetheless, there are cautionary notes regarding extended delivery times and potential competition from Huawei’s Mate60 series. Some analysts suggest that Apple’s stock price may be overvalued and could undergo a correction in the future. It’s important to consider these factors and conduct further research before making any investment decisions.
Against the current macro backdrop of high global inflation, Chen Da believes that Apple can resist inflation. “Apple’s pricing of products is strategic and foreseeable. Apple raised the price of its mobile phone from about US$860 to US$949 when it released the iPhone 13 in 2021. Such an obvious price increase is because Apple foresaw in 2021 that it would be in 2022. inflation, so they chose to increase prices in advance to maintain the company’s high profitability.”
Brian Colello said: “Apple’s differentiation allows it to maintain excellent gross profit margins. During economic downturns, they may decline slightly, but overall they still It should be quite strong.” There is no doubt that Apple is a wide-moat company. Apple has strong market pricing power, which has enabled Apple to maintain a gross profit margin of 44.5% even as its overall revenue continues to decline.
Services, wearables and India are next growth areas
Regarding Apple’s revenue, Brian Colello does not expect much growth in the next 12 months, but VisionPro, which will be released next year, may contribute to Apple’s revenue.
Brian Colello told this publication: “Vision Pro left a deep impression on us. If VR/XR/AR wants to succeed, Apple is likely to be at the forefront of this field. But on the other hand, Vision Pro will not be as popular as the iPhone.” It is widely used because communication through mobile phones is a necessity in people’s lives, and the price of iPhone is also much lower than VisionPro.”
In addition, service is another performance booster that Brian is optimistic about. The latest financial report shows that the number of paying users of Apple’s digital services has exceeded 1 billion worldwide, and the growth of this business has helped increase the company’s gross profit. The world’s largest company by market capitalization saw total revenue fall 1% to US$81.8 billion during the reporting period ended July 1 this year, but net profit increased 2.3% to US$19.9 billion. During the latest reporting period, Apple created strong operating cash flow of approximately 26 billion yuan and returned more than 24 billion U.S. dollars to shareholders. Apple’s board of directors also declared a cash dividend of $0.24 per share of the company’s common stock.
Chen Da is also optimistic about Apple’s service business and believes that the revenue share of the service business may be the same as that of the iPhone in the future. “Smartphones have reached a bottleneck in terminal equipment and are no longer a high-speed growth industry, but everyone may continue to pay for mobile phone subscription services in the future.”
More performance growth may also lie in consumption in emerging markets. Currently, the iPhone’s performance in the Americas (mainly the United States) has declined, but its performance in emerging markets—China, India, Indonesia, Southeast Asia, Latin America, and the Middle East—is very strong. Cook specifically emphasized the importance of the Indian market during the earnings call: “India is already the second largest smartphone market in the world. I think this is a huge opportunity for us, and we are investing all our energy to achieve this. One goal.”