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Is it too late to buy Apple stock?
Be a shareholder of Litter (NASDAQ: AAPL) hasn’t been easy this past year. Shares are up 5% since last May, which is unusual for a company that regularly outperforms S&P 500 (which grew 25% in the same period).
Spikes in inflation in 2023 have caused reductions in consumer spending, leading Apple to record four consecutive quarters of declining revenue.
However, the company appears to be turning things around in 2024. After missing earnings estimates for all of last year, revenue came in line with forecasts in the first quarter of 2024 and beat them in the second quarter.
Apple still has a lot of work to do as it restructures itself to rely less on long-term iPhone sales and expands into artificial intelligence (AI). But the company’s significant cash reserves and nearly unparalleled brand loyalty suggest its shares remain an attractive investment for patient shareholders.
So here’s why it’s not too late to buy Apple stock.
Exceeding expectations alongside the largest share buyback in its history
Apple shares have risen 5% since the company reported its second-quarter 2024 earnings on May 2. During the quarter, revenue fell 4% year over year to $91 billion, but beat analyst forecasts by $190 million. Earnings per share were $1.53, versus expectations of $1.50.
The iPhone business took another hit in the quarter, with sales falling 10%. The company said COVID-related supply strains during the previous year caused Apple to hit $5 billion in iPhone 14 sales delays. CEO Tim Cook said, “If you remove that $5 billion from the results last year, we would have grown this quarter year on year.”
The positive point of the quarter came from the company’s second highest revenue segment, services. The digital business includes revenue from the App Store and its various subscription services, with revenue increasing 14% year over year.
But the recent rally was mainly due to news that Apple plans to repurchase $110 billion in shares, the largest amount in its history. The number surpasses last year’s $90 billion buyback and will see its dividend increase by $0.01.
Apple still has a mountain to climb to regain consistent quarterly growth, but the buyback plan is a vote of confidence from management in the company’s financial future.
The company remains a leader in consumer technology, achieving $102 billion in free cash flow in the second quarter, despite recent headwinds. This number indicates that you have the resources to continue investing in your business and overcome current challenges.
The story continues
Future products will place a more significant focus on AI
Apple was back in the headlines this week following the Let Loose product event, where the company unveiled a new iPad Air, iPad Pro and the Apple Pencil Pro.
The new devices signaled a shift in Apple’s product lineup, with its new iPad Pro equipped with what the company describes as an “outrageously powerful chip for AI.” It dubbed the new chip the M4, coming just a few months after the M3 chip debuted in new Macs last October.
Demand for artificial intelligence services and AI-capable devices have skyrocketed since last year. The company was a little late to the AI party, while Microsoft It is Amazon have dominated the space with their respective cloud platforms. However, as a leader in consumer technology, Apple has a unique opportunity to become the preferred choice for businesses and consumers looking for AI-enabled products.
The immense loyalty to the brand from its users has allowed Apple to achieve leading market shares in smartphones, tablets, headphones and smartwatches. As a result, expanding its AI capabilities could make the company a key growth engine in public adoption of the technology.
The iPad announcement follows news in April that Apple had acquired Datakalab, a Paris-based start-up specializing in AI tools for devices. Last month, Bloomberg also reported that Apple plans to revamp its Mac lineup to prioritize AI offerings.
The AI market is rapidly expanding and is predicted to have a compound annual growth rate of 37% through 2030. If Apple can leverage its brand power to dominate the AI product segment, the company could enjoy a significant increase in profits in the coming years. .
AMZN PE Ratio (Forward) Chart
Additionally, Apple is one of the best value AI stocks compared to Microsoft and Amazon. This chart shows that the iPhone company has a significantly lower forward price-to-earnings ratio and price-to-free cash flow, indicating that its shares are trading at a bargain price compared to these tech giants.
It will take some time for the company to turn things around, but it’s not too late to invest in Apple. Its expanding services business and growing position in AI make its stock worth considering for long-term holding.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Cook has no position in any of the stocks mentioned. The Motley Fool has positions on and recommends Amazon, Apple and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The motley fool has a disclosure policy.
Is it too late to buy Apple stock? was originally published by The Motley Fool