Apple (NASDAQ:AAPL) it has been a safe haven for investors throughout 2022 as several tech stocks have plunged, but the iPhone maker has emerged comparatively unscathed. While companies like Microsoft, AlphabetY advanced micro devices have seen their share prices fall between 30% and 58% since January, Apple shares are down a more moderate 14% year to date.
The stock market sell-off has been the result of reduced consumer spending thanks to increases in inflation and interest rates. However, Apple’s ability to weather a market downturn makes a company worth investing in. The media has projected a pessimistic attitude when reporting on Apple in recent months, but the company has continued to prove otherwise.
After Apple posted better-than-expected fourth-quarter results on Oct. 28, critics might be more convinced of its long-term prospects. As a result, now might be the best time to invest in Apple stock.
weathering the storm
Since January, consumer spending has slowed significantly, with the tech industry being one of the hardest hit. For example, the smartphone market saw a 9.7% year-over-year decline in Q4 2022, with Apple’s 1.6% increase the only growth in the entire industry. The growth is even more impressive considering the quarter would have only included about a week of sales from its recently launched iPhone 14 lineup.
Jusy Hong, senior research manager at industry tracker Omdia, said in a report that Apple’s positive performance is because “its consumers are typically high-income, loyal customers,” suggesting that there have been been less affected by the rising cost of living. Hong’s comment has been corroborated by multiple reports that the iPhone 14 Pro models are selling much more than the base versions. Apple CEO Tim Cook revealed on Oct. 27 that the company has been “constrained” and “supply chasing” in trying to meet demand for the iPhone 14 Pro and Pro Max.
Additionally, Apple’s fourth-quarter 2022 revenue increased 8% from a year earlier to $90.1 billion, with several segments outperforming fourth-quarter 2021. Revenue from its 42-year iPhone segment $630 million was up from $38.87 billion a year earlier, while Q4 2022 Mac revenue of $11.51 billion was also an improvement over Q4 2021 of $9.18 billion. With several companies in the PC market suffering from reduced demand, Apple’s 25% growth in its Mac segment demonstrates the power of its products, as consumer preference for MacBooks shone in a quarter that meant a return to school for many consumers.
Apple hasn’t been completely affected by market downturns. Chief Financial Officer Luca Maestri said the company expects the rate of sales in the first quarter of 2023 to “slow down”. Additionally, despite all other segments seeing growth, its iPad revenue declined year over year from $8.25 billion to $7.17 billion. However, it was also the only segment that did not receive any new products since September 2021.
The iPhone company continues to exceed analyst expectations, demonstrating its dominance and ability to persevere regardless of market conditions.
Long-term growth through services
In addition to the well-performing product segments, Apple’s services business continued to show its crucial role in the company’s long-term growth. In the fourth quarter of 2022, the segment grew 5% year over year, from $18.27 billion to $19.19 billion. Service growth slowed from the same quarter a year earlier due to declines in consumer spending. However, its 70% range margins and planned price increases could make it the core of Apple’s future growth.
Apple’s services segment includes platforms such as Apple Music, TV+, Fitness+, Arcade, News+ and iCloud+. Since the first quarter of 2019, the business has grown 76%, and is now the company’s second best performing segment, accounting for 21.3% of its revenue in the fourth quarter of 2022.
Despite a slowdown in growth, Apple’s price increases in the segment could help protect it against further declines in consumer discretionary spending. Apple Music has increased from $1 to $2 per month based on individual or family plans, while Apple TV+ has also seen a price increase of $2 per month.
Apple TV+’s price increase is especially promising since, even though its content library has grown significantly since its launch in November 2019, its new price of $6.99 per month still makes it lower than its biggest competition. Netflix‘sand DisneyDisney+’s next ad-supported tiers will cost $6.99 and $7.99 per month, respectively, while Apple TV+ is the same price or less without ads.
As a result, Apple is in a unique position to continue to attract consumers to its ecosystem through its world-class services and devices.
Now is the time
Apple shares rose nearly 8% on Oct. 28 after the company released its fourth-quarter 2022 earnings. Investors rebounded on its ability to report growth despite many of its competitors seeing sharp declines. Consequently, Wall Street could start flocking to Apple for a safe investment away from the riskier areas of the market.
So now might be the best time to invest in Apple stock before it experiences steeper gains in the coming weeks.
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. dani cook has no position in any of the mentioned stocks. The Motley Fool holds positions and recommends Advanced Micro Devices, Alphabet (A shares), Alphabet (C shares), Apple, Microsoft, Netflix and Walt Disney. The Motley Fool recommends the following options: $145 long calls in January 2024 at Walt Disney, $120 long calls in March 2023 at Apple, $155 short calls in January 2024 at Walt Disney, and $130 short calls in March 2024. 2023 at Apple. The Motley Fool has a disclosure policy.
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