Apple (NASDAQ:AAPL) is a stock that has experienced fluctuations in price over the last two years. Nonetheless, recent promising developments have positioned it as a prime investment opportunity.
The COVID-19 pandemic led to a tech boom, driving many stocks, including Apple’s, to reach all-time highs. However, recent economic challenges and restrictions on consumer spending caused a decline in tech stocks, with Apple shares falling 26.8% in 2022.
However, the dip is not the reason to invest in AAPL stock. Far from it, Apple is not the kind of company you can take lightly in any situation.
Apple’s focus on developing high-quality products has enabled the company to charge premium prices. In addition, Apple is continuously expanding its product portfolio. It indicates that its management constantly focuses on satisfying consumers and boosting profitability.
In my opinion, this is the most compelling reason to invest in AAPL stock for the long term.
AAPL Stock: Focusing on the Big Picture
Apple is currently focusing on strengthening its iPhone business. This segment accounted for 52% of the company’s revenue in fiscal 2022. Apple’s strategy of shifting production from China to India aims to boost its long-term profitability.
Apple reportedly plans to replace costly partnerships with Samsung and LG for iPhone displays. Additionally, the company is developing a custom Wi-Fi and Bluetooth chip to replace chips from Broadcom and Qualcomm.
With these strategic moves, Apple’s long-term outlook appears highly favorable. Therefore, now is an ideal time to invest in Apple stock.
On a separate note, Apple is expanding its digital services business to decrease its dependence on product revenue. Besides focusing on strengthening its iPhone business, the company is also increasing its service offerings.
Apple’s services, including Apple TV+, Music, iCloud, Fitness+, and Arcade, generated $78.1 billion in revenue in fiscal 2022. This represents double the iPhone’s growth. Additionally, services boasted a profit margin of 71.7%, significantly higher than the 36.3% margin from products.
Apple’s entrance into the music streaming market presents ample opportunities for substantial gains. The music streaming market is anticipated to experience a compound annual growth rate of 14.7% until 2030. In addition to music streaming, Apple’s services include video streaming, fitness apps, and gaming, all offering growth potential.
Virtual Reality/Augmented Reality Market
Apple is diversifying its product lineup by entering the AR/VR markets with a new headset, allowing the company to capitalize on a rapidly growing market.
By 2023, the AR & VR market is expected to generate revenue of $31.12 billion, with a projected growth rate of 13.72%, reaching a market volume of $52.05 billion by 2027. The largest segment is AR Software, valued at $11.58 billion in 2023, with the U.S. generating the most revenue, projected at $8.568 billion.
The market is expected to have 2.593 billion users by 2027, with user penetration projected to increase from 28.8% in 2023 to 32.6% in 2027 and an expected ARPU of $14.08.
A Brand Like No Other
Apple’s focus on developing high-quality products has resulted in the ability to charge premium prices, leading to strong brand loyalty from consumers.
By prioritizing its focus on developing high-quality products, Apple achieved a significant milestone in September 2022 by overtaking Alphabet’s Android for the most smartphone market share, reaching 50%.
This is especially promising because consumers tend to stick with their chosen smartphone operating system for the long term.
By dominating the smartphone market, Apple can leverage its design language and promote complementary products and services, such as its MacBook lineup. IPhone users tend to exhibit brand loyalty and are less likely to switch to competing products. That makes it recession-resistant in my eyes.
Apple’s prosperous product line has fueled impressive growth, with its revenue increasing by 48% to $394 billion and its operating income soaring by 68% to $119 billion over the past five years.
Is AAPL Stock a Buy, Hold, or Sell?
In summary, Apple is a significant player in the tech industry, characterized by its ability to innovate and adapt. The company’s focus on bolstering its iPhone business has yielded positive outcomes, as this segment constitutes most of its revenue.
Furthermore, Apple’s foray into the digital services business is a promising initiative contributing to a diversified business model. Looking ahead, Apple’s entry into the virtual reality/augmented reality market through its new headset release in June 2023 is an exciting prospect that could significantly boost earnings and keep the company on its current growth trajectory.
While there are concerns about Apple’s declining revenue in the first quarter of the fiscal year 2023, many experts recommend holding onto Apple’s stock. Apple remains an attractive investment option with a history of dominating new markets and an impressive product line.
On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.