Why did Apple's stock price break 3 trillion again?
The iPhone 15 almost suffered a Waterloo Apple's stock price actually hit a new high.
As of the close of trading on December 8, Apple's market capitalization once again exceeded $3 trillion to $3.04 trillion, and for the first time since August last year, the company's stock price rose 2.11% at the close of trading in recent days.
This has raised many questions, how can Cook usher in a surge in stock prices when the product is questioned and the quality is worried?
In fact, despite declining sales of iPads, iPhones and wearables, Apple's stock price has shown surprising resilience, with the stock up nearly 50% so far this year. The perspective of the capital market's main observation of enterprises is not the same as that of ordinary people, and from the perspective of a healthy development company, Apple seems to be doing a good job under the leadership of Cook.
From the perspective of Wall Street analysts, Apple, which already has a huge stock of device data, is only a temporary problem in the sales of new products, and what will really affect the long-term development is that they can use the huge number of iPads, iPhones, and wearables in the hands of consumers to form new growth in content services and consumption, and finally drive the transformation of the enterprise.
Because of their optimism about Apple's new business, some of the top Wall Street analysts expect the iPhone maker's share price to reach the highest price target of $240 given by analysts in the next 12 months. This indicates that Apple's share price has the potential to rise by a further 24.08% from current levels.
It's no wonder that Apple's stock continues to move higher.
Price reduction has become the performance card
In early November, Apple released the company's earnings report for the fourth quarter of fiscal 2023. In the quarter, Apple achieved revenue of $89.498 billion, down 0.72% year-on-year, and net profit of $22.956 billion, up 10.79% year-on-year.
Although the iPhone business revenue has increased, the other hardware business has not performed well, so Apple's revenue has declined year-on-year for four consecutive quarters.
According to the financial report, in the third quarter, the iPhone business revenue was 43.805 billion US dollars, compared with 42.626 billion US dollars in the same period last year, the Mac business revenue was 7.614 billion US dollars, compared with 11.508 billion US dollars in the same period last year, the iPad-related business revenue was 6.443 billion US dollars, compared with 7.174 billion US dollars in the same period last year, and the wearable, home and accessories business revenue was 9.322 billion US dollars, compared with 9.650 billion US dollars in the same period last year.
Focusing on the Chinese market, Apple's revenue in Greater China was $15.084 billion, down 2% year-on-year. According to data from market research agency Counterpoint, sales of the iPhone 15 fell by 4.5% compared to the iPhone 14 in the 17 days after its release. In order to drive sales, Apple has made an unprecedented price reduction for new products in the Chinese market.
On November 14, the topic #iPhone 15.11 price reduction in the last two hours# appeared on the third hot search list on Weibo, receiving 190 million views. Some netizens said that Apple's official flagship store "Double 11" violated its "promise", and the iPhone 15 was reduced by 200-300 yuan in the last two hours, feeling that they were "stabbed in the back" by Apple. The latest news shows that during the double 12 period, Apple's iPhone 15 will reduce the price of the whole series by about 800 yuan.
In the main market of the United States, in fact, the sales of the iPhone 15 are also done by price reduction. CIRP statistics show that since the beginning of this year, the number of U.S. users who buy iPhones through direct sales channels has fallen to a new low, only 17%, of which about 11% come from physical Apple stores, and 6% from Apple's official website, and the biggest winners are mobile operators, accounting for 79% of iPhone sales. Among them, in order to promote the sales of iPhone15, several major operators in the United States have given the benefits of spending subsidies, so that consumers are more willing to change their phones. And this kind of subsidy is actually an invisible price reduction.
However, the hot spot in the financial report is actually Apple's service business, which performed very well, with revenue of $22.314 billion in the third quarter, an increase of 16.29% year-on-year.
This has become the real good news that can be said in the third quarter report, in addition to the price reduction that triggered the sales growth, and it is this that makes analysts vote in favor of Apple's development.
The main reason for being bullish on apples
Apple's financials and stock will be supported by the iPhone's high revenues, continued strong growth in the services business segment, and a growing active device installed base. However, a difficult comparison with the same period last year may affect iPad sales. At the same time, weak sales in Apple's wearables, home and accessories business units will continue to weigh on the company's performance in the near term.
Meanwhile, Wedbush analyst Daniel Ives remains bullish on Apple's prospects and maintained a "buy" rating on Apple stock at the end of November. The analyst's optimism is based on the strong sales of iPhones and the strong momentum of Apple's service division.
In other words, many institutional investors have shifted their research on Apple's development from the sale of hardware devices to the business of software and content services such as apps.
Previously, Apple has been known for its hardware device sales, such as iPhones, iPads, Macs, etc. The sales revenue of these hardware devices is one of Apple's main sources of revenue and an important support for the rise of its stock price. However, over time, the focus of institutional investors on Apple has changed.
But now, many institutional investors are starting to pay more attention to Apple's business in software and content services. For example, the revenue from services such as Apple Music, iCloud, and the App Store has gradually become one of Apple's important sources of income.
According to the financial report, Apple has more than 860 million users, and many people buy digital products and services from the App Store. Morgan Stanley recently noted that if Apple focuses on a "more pronounced shift to a subscription-based model," the final value generated by its subscription services could reach $3 trillion.
What's more, Apple has begun to raise prices for subscription services this year.
As early as October 25, Apple announced overseas that the prices of its subscription services such as Apple Music, Apple News, and Apple TV + will be adjusted, with a general increase of 10%-15%. On December 10, Apple's official website showed that Apple Music China raised the subscription price, with the price of student subscriptions rising by 1 yuan to 6 yuan/month, the price of individual subscriptions rising by 1 yuan to 11 yuan/month, and the price of family subscriptions rising by 1 yuan to 17 yuan/month.
According to JPMorgan analyst Samik Chatterjee, the total number of Apple Music and Apple Arcade subscribers could reach about 180 million by 2025, with 110 million paying for the company's music services and 70 million paying for games.
To some extent, these services not only bring continuous revenue to Apple, but also enhance users' loyalty and stickiness to the Apple brand.
UBS analyst David Vogt said in a note that Sensor Tower data showed App Store spending grew 11% year-over-year last month, supporting the agency's forecast for 16% growth in Apple's services division as a whole in the quarter.
As a result, Apple began to pay more attention to the development and promotion of software and content services. This includes continuously optimizing existing services, launching new services and applications, and strengthening partnerships with content providers. Apple's share price will also be further supported by continuing to meet the needs and expectations of institutional investors.
Notably, Apple has set an all-time revenue record in the services sector, with the company achieving double-digit growth in the fiscal fourth quarter.
Tigress Financial analyst Ivan Feinseth reiterated a "buy" rating on Apple stock in mid-November. Analyst Feinseth has given the stock a price target of $240, and the analyst expects "record iPhone sales and service revenues, as well as margin growth" to support Apple's financials and enable the company to improve shareholder value.
What the future holds
With its stable and long-term growth performance, Apple is undoubtedly a stock to watch. The driving force behind this is the continued demand for iPhones, especially in emerging markets, where the consumption potential is huge, providing a broad space for Apple's product sales.
Coupled with the strong momentum of the company's growing services division, it has shown strong growth momentum in terms of both revenue and profit. These positive factors, reflected in analysts' optimism about the prospects of Apple's stock, also further confirm the strength and potential of Apple.
Specifically, Wall Street analysts rated Apple stock extremely highly. Of their ratings, 25 give a buy recommendation, while 8 maintain a hold rating. This has given Apple stock a consensus rating of "Strong Buy".
This rating not only reflects analysts' strong confidence in Apple's future, but also shows that they believe that Apple stock has high investment value and growth potential after Apple began to focus on service revenue.
In addition, analysts made predictions about Apple's future share price. They give an average price target of $201.99 to Apple stock, which is 4.43% higher than the current price. This data further confirms that analysts are optimistic about Apple's future, and also reflects their belief that Apple's stock has great upside potential.
Analysts believe that Apple will benefit from the growth of iPhone sales and the continued momentum of the company's services division. In addition, an improved supply environment will support the company's revenue.
A number of market research institutions believe that smartphone shipments will gradually recover in the next few quarters, and may achieve moderate growth next year. In addition, next year Apple will also release the Vision Pro headset, which is another new computing platform for the company since the launch of the Apple Watch in 2014, and the outside world is full of anticipation.
Some analysts believe that thanks to the wave of artificial intelligence, technology giants still have the strength to fight next year and can continue to rise sharply. Dan Ives, an analyst at U.S. investment bank Wedbush, pointed out in a recent report that he expects a "wave" of AI applications to drive the stock prices of high-tech companies up nearly 30% next year.
To be clear, however, Apple is currently trading at around 29x earnings, which is well above the S&P 500's median P/E ratio of 17x. Toni Sacconaghi, an analyst at Bernstein, wrote in a note last month that it makes sense to pay a higher share price for Apple compared to other big tech companies that are expected to grow faster and have higher profit margins. ”
Coupled with the U.S. Department of Justice's lawsuit against Google, it's an element of uncertainty. According to the indictment filing, Google unfairly locked in its own dominance by paying Apple billions of dollars a year to lock in its position as the default search engine for the iPhone and Safari web browsers. If Google loses the lawsuit, Apple could lose billions of dollars in revenue.
All these factors point to the uncertainty of Apple's future. In this context, breaking through the market capitalization limit of $3 trillion may be the last glory of the Apple empire?
Everything needs to be decided in time.
作 者 | Amit Singh 张津京