Hello dear Getquiner.
I would like to dedicate this post to my by far largest position in the portfolio: $AAPL .
But first the following: yes I have Apple heavily overweighted. This is because my first shares, which I bought at the beginning of 2017, were precisely these Apple shares. Due to the very good performance in the last 5 years, it came to the strong overweighting with currently almost 38% of my portfolio. I see no reason to reallocate in the current situation, but I am not buying at the current prices, as I am aiming for a long-term maximum weighting of 15%.
>>Introduction<<
This now cuts to the real topic of my post: Apple's growth prospects. Way before I was invested in Apple, I was toying with the idea of buying Apple stock every now and then. At that time I didn't even have a portfolio. Even then, many people kept saying "the iPhone hype is over, Apple will no longer rise". Everyone who takes a look at Apple's share price and sales figures knows that this has not happened. Since the prices for many tech stocks are currently falling, many people are asking themselves which tech company is a "bargain" at the moment and/or which has good growth prospects. Again and again I read or hear similar sentences like "Apple's golden times are over" or "Apple has no good growth prospects". This is exactly what I want to talk about now. Does Apple really no longer have good growth prospects?
>>Historical view<<
Apple macht seine Umsätze hauptsächlich in den folgenden 5 Kategorien: „iPhone“, „Services“, „Mac“, „iPad“, „Wearables, Home & Accessoires“. In die Kategorie "Services" fallen unter anderem iCloud, App Store, Apple Music, Apple TV+, Werbeanzeigen und Apple Pay. In die Kategorie "Wearables, Home & Accessoires" fällt unter anderem die Apple Watch, die AirPods, sämtliches Zubehör von Apple, Beats-Produkte und die HomePods. [1] Schauen wir uns erstmal die Entwicklung der Umsätze in diesen Kategorien in den vergangenen 4 Jahren an [1],[2]:
>iPhone:
2017: $141.3 billion (share of total revenue 61.7%)
2021: $192.0 billion (share of total revenue 52.5%)
Growth 4 years absolute: 35.9%
average growth per year*: 8%
>Services:
2017: $30 billion (share of total revenue 13.1%)
2021: $68.4 billion (share of total revenue 18.7%)
Growth 4 years absolute: 128%
average growth per year*: 22.9%
>Mac:
2017: $25.8 billion (share of total revenue 11.3%)
2021: $35.2 billion (share of total sales 9.6%)
Growth 4 years absolute: 36.4%
average growth per year*: 8.1%
>iPad:
2017: $19.2 billion (share of total revenue 8.3%)
2021: $31.9 billion (share of total revenue 8.7%)
Growth 4 years absolute: 66.2%
average growth per year*: 13.5%
>Wearables, Home & Accessories:
2017: $12.9 billion (share of total sales 5.6%)
2022: $38.4 billion (share of total sales 10.5%)
Growth 4 years absolute: 197.7%
average growth per year*: 31.4%
>Total:
2017: $229.2 billion (at a margin of 31.2%)
2022: $365.9 billion (at a margin of 32.9%)
Growth 4 years absolute: 59.6%
average growth per year*: 12.4%
*here, average growth per year means the solution x of (sales 2021)/(sales 2017) = (1+x)^4. This therefore corresponds to a "homogenized" growth rate of sales per year.
You can see that especially the categories "Wearables, Home & Accessories" and "Services" are very fast growing business areas of Apple. Whereas iPhone and Mac grow on average with "only" 8% per year. Furthermore, one can see a reduction in the dependence of sales on the iPhone.
>>Development in the future<<
>iPhone
It has been said here for years that the iPhone market is saturated and there is very little growth potential left. I partially agree with that. I don't think growth rates in the 15-20% range are still possible here. However, Apple has recently managed to make up some ground against Android. As of April 2022, the global market share of iOS among smartphones is 27.7%, whereas it was only 22.7% in 2019. In the same period, the global market share of Android, its biggest competitor, dropped from 75.4% to 71.9% [3]. In addition, I think Apple has realized since the release of the iPhone 12 that it can also be worthwhile to offer relatively cheaper smartphones with good features. Apart from that, Apple also seems to expect that it could become more difficult to sell iPhones above the $1000 mark in the future and could rely on a subscription model for future iPhone models for the first time, according to Bloomberg [4]. An "all-in-one package" with Apple Music, Apple TV+ or Apple Fitness+ would also be conceivable here [5]. This could encourage many Android users to try out an iPhone, because the high price would remove the barrier to entry. Overall, it can be assumed that at least the growth rate of around 8% can be maintained. The average forecast for the years 2022-2027 is a growth rate of 7.4% [6]. Apple also generates 62% of global profits from smartphones with only 13% share of smartphones sold worldwide [7].
A potential risk is of course the COVID19 pandemic in China, which could lead to production losses. The chip shortage could also have a negative impact on such a huge amount of iPhones produced.
>Services
The services division has become the second largest revenue driver for Apple in recent years. Just imagine that the services division would be an independent company: 68.4 billion revenue (as much revenue as Tesla and Starbucks together), growth rates of about 20% and a gross margin of 69.7% (!!) [1]. Here it is difficult to forecast how the service division will develop in the next few years. Here, due to some ongoing lawsuits, there is a risk that apps for iPhone and iPad can no longer be downloaded exclusively from the App Store. However, I still see a lot of growth potential in the areas of iCloud, Apple TV+, Apple Music and Apple Fitness+ (see synergy effects with AppleWatch below), since only a fraction of iOS users have used these services against payment so far. Also, Apple launched "Apple One" last year, which bundles the various services into one subscription and could thus encourage more iOS users to get all subscriptions into one "all-in-one" subscription. Of course, the planned iPhone subscription would also ensure growth in the services area.
>Mac
The Mac was Apple's core division for a long time but has lost importance in terms of revenue share in recent years. Since 2020, Apple has started to develop its own processors for the Macs, replacing the previous Intel chips. This should increase the margin in the future: on the one hand, by eliminating Intel as a supplier and, on the other hand, through synergy effects with iPad and iPhone. This year, Apple also wants to take the last Macs with Intel chips out of the program, so that all Macs will then run with Apple's own processors. Word should already have spread that these chips set new standards in performance and efficiency. The worldwide market share of Windows computers has been falling for years, from a good 86% in 2015 to 75% in 2022 [8]. Apple with macOS and Alphabet or Google with ChromeOS [8] are pushing into this gap. The MacBook Air and the small iMac are likely to be of particular importance for the "mass suitability" of macOS.
>iPad
Since 2020, Apple has now equipped its iPad Pro's and since 2022 also the iPad Air with chips that are also used in the Mac in the same form. I see the low-priced entry-level iPad on the upswing in the future: tablets will gain in importance due to their possible use in schools, universities and public institutions in the course of digitalization. Apple is already the market leader in the tablet segment and could thus benefit from an increasing demand for tablets.
>Wearables, Home & Accessories
This is the area where I personally see the most growth potential. Starting with AirPods: in 2019 alone, Apple was forecast to generate $12 billion in revenue from AirPods [9]. By 2019, it is estimated that 110 million AirPods will have been sold - and the trend is clearly upwards. If we now take into account that there are well over 1 billion iOS devices in circulation worldwide and that the AirPods can of course also be conventionally paired with Android smartphones, there is still enormous potential for growth.
Another growth factor in this category is also the Apple Watch. Apple could sell an estimated 33.9 million Apple Watches in 2020 [10] and has a global market share of about 30% [11]. Again, I see a lot of potential here, as the trend to monitor one's fitness and vital data will continue to grow in the future. In addition, there could again be synergy effects with Apple Fitness+: if someone buys an Apple Watch, they are more likely to use Apple Fitness+. If someone wants to use Apple Fitness+, it definitely makes sense to buy an Apple Watch. Again, Apple offers a wide range of products: from low-cost entry-level models to more expensive smartwatches.
Lastly, I would like to say a few words about the HomePods. Apple has discontinued the original HomePod, but at the same time Apple released the HomePod Mini and is directly attacking the Amazon Echo. You can see that this area is important to Apple just by the time they took for the product presentation at the keynote. The market will continue to grow in the future and many people will buy a smart speaker in the next few years. Since iOS users traditionally place a lot of value on solutions that integrate well into their Apple cosmos, the HomePod Mini will also be high on the wish list here.
>Other
Rumors keep coming up Apple could introduce an "Apple Car" or "iCar" in the next few years. Since this is pure speculation and it is not at all clear when or in what form such an Apple Car will come onto the market, I will not consider it here in my review. I also do not take into account the rumor of Apple VR glasses that has arisen many times, since it is completely unclear whether it will appear and what kind of product it should be.
>>Summary<<
Ich hoffe ich konnte darlegen das Apple durchaus noch gut Wachstumspotenzial besitzt. Insgesamt wird Apple in Zukunft noch stärker Synergieeffekte nutzen um Kundenbindung zu schaffen. Apple gelingt es meiner Meinung wie kaum ein anderes Unternehmen seine Kunden langfristig an das Unternehmen zu binden. Die starke Abhängigkeit vom iPhone wurde reduziert und dürfte auch in Zukunft weiter reduziert werden. Die schwierige Aufgabe neben dem (immer noch wachsenden!) iPhone-Umsätzen neue Umsatzquellen zu schaffen wurde bislang mit Erfolg gemeistert und wird meiner Meinung nach auch in Zukunft gelingen. Ich sehe hier Apple in jeder Sparte sehr gut aufgestellt für die Zukunft. Wachstumsmöglichkeiten gibt es meiner Meinung nach vor allem im Service- und im Wearables-Bereich. Positiv auf den Kurs könnte sich auch das geplante 90 Milliarden $ Aktienrückkauf-Programm auswirken, welches vor Kurzem angekündigt wurde. Apple besitzt Cash-Reserven in Höhe von 193 Milliarden $ (vergleichbar mit einem Jahresumsatz an iPhones!). Dem gegenüber stehen Schulden in Höhe von 120 Milliarden $ [12].
>>Conclusion<<
As mentioned above, I personally would not buy at the current price of about 140€, since I am already heavily invested in Apple anyway and would like to drive my portfolio weighting (without Apple stock sales) down. People who are looking for a suitable entry price could possibly look at the range 125-135€. Overall not investment advice but just my personal opinion. What do you think about Apple? Would you buy now, sell or if you already own the stock just hold it? What would be an attractive entry or post-buy price for you at the moment?
[1] Apple Investor Relations: https://s2.q4cdn.com/470004039/files/doc_financials/2021/q4/_10-K-2021-(As-Filed).pdf
[2] MacPrime: https://www.macprime.ch/a/wissen/apple-geschaeftszahlen-analysen-grafiken-umsatz-gewinn-verkaufszahlen
[3] MacWorld: https://www.macwelt.de/news/Dank-iPhone-12-Android-Nutzer-fluechten-zu-iOS-11065140.html
[4] Bloomberg: https://www.bloomberg.com/news/articles/2022-03-24/apple-is-working-on-a-hardware-subscription-service-for-iphones
[5] NetWorld: https://www.netzwelt.de/news/201433-iphone-abo-apple-geraete-bald-monatlichen-mini-preis-geben.html
[6] Market Data Forecast: https://www.marketdataforecast.com/market-reports/smartphone-market
[7] Counterpoint Research: https://www.counterpointresearch.com/global-handset-market-operating-profit-q2-2021/
[8] Statcounter: https://gs.statcounter.com/os-market-share/desktop/worldwide/#monthly-201510-202205
[9] MacerHead: https://www.macerkopf.de/2020/01/08/airpods-umsatz-spotify-twitter-snap/
[10] Statista: https://de.statista.com/infografik/15047/geschaetzter-weltweiter-smartwatch-absatz/
[11] Statista: https://de.statista.com/themen/3471/wearables/#topicHeader__wrapper
[12] MacGadget: https://www.macgadget.de/News/2022/04/29/Apple-stockt-Dividende-und-Aktienrueckkaufprogramm-auf
