There’s been lots of excitement this week over the brand-new iPhone.
While it’s a bit too early to determine whether it will be successful or not, we thought it would be a good time to discuss the nitty gritty of Apple as a company…
The good, the bad, and the ugly!
The Good Stuff:
1.) Market opportunity in India
With a growing middle class, the country of India represents a massive opportunity for a company like Apple.
So far, they have not been able to penetrate the market as much as they would hope…
Apple was only able to capture 4% of India’s smartphone market in 2022!
Part of that has to do with Chinese-based manufacturers dominating with their great specs and cheaper prices.
Tim Cook clearly sees an opportunity here though…
The company opened its first two stores in India back in April, with the CEO himself paying a little visit.
It’s important to keep in mind that turning things around in India will be a tall order…
With that said, Apple certainly has the capabilities to pull it off.
If you need proof, take a look at what they did with China’s smartphone market over the past 12 years!
2.) Vision Pro
Naturally, folks got very excited about a new product by Apple…..something that hasn’t happened since their smartwatch launch in 2014!
Why do we care about this particular product?
It positions the company to compete in the VR/AR space, which Meta currently dominates in.
While this is a large industry in and of itself, it’s a part of something much larger…
According to Strategic Market Research, the global metaverse market is projected to grow to around $946 billion by 2030, with a CAGR of over 39%!
While there are a lot of exciting opportunities here for Apple, it’s important not to get too carried away…
The Vision Pro hasn’t launched yet.
Not to mention…..the price tag is expected to be a whopping $3499!
3.) PE ratio on the lower end
The current PE ratio for Apple at the time of writing this (according to Companies Market Cap) is around 29.9.
Let’s compare that to the rest of the “Magnificent Seven” companies.
The what you ask…
The companies we are referring to are Amazon, Microsoft, Meta, Alphabet, Tesla, and Nvidia.
Only Alphabet has a lower PE currently among the players listed above!
While PE ratios are not the only important metric to keep in mind, it is certainly something that investors will be paying attention to…
4.) Services division growing
Apple reported in their latest earnings report that services grew over 8% to $21.2 billion in sales!
They also guided for even more impressive numbers for their upcoming fourth fiscal quarter…
Services include things like subscriptions, licensing fees, and Apple Pay.
This is great news considering that the profit margins for this segment are the highest for the company!
The Not So Good:
1.) Not a big AI play (at the moment)
Most of the mega-cap companies highlighted above have jumped heavily on the AI bandwagon.
Apple has kept fairly quiet on this front however…
While the economic impact of AI has yet to be determined, there is a good possibility that it will transform our economy as we know it.
Major players who choose to ignore or underspend in this segment may end up being left behind!
While there are reports that Apple is working on a ChatGPT competitor codenamed “Ajax”, the details of the project are speculative at this point.
2.) Decline in Sales
Even though we did say earlier that the company’s services business is doing really well, things are rough around the edges for Apple as a whole.
They are a consumer product business first and foremost, with over 50% of its revenue coming from the iPhone…
The problem?
Product sales are down for the company, resulting in three consecutive year-over-year drops in quarterly revenue!
While the latest iPhone might get things back on track, it’s definitely a wait-and-see at the moment…
That’s all for now!
Until Next Time,
-Damian