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Apple (NASDAQ: AAPL ) stock could have tremendous upside potential in 2023 and beyond, I feel. This same sentiment was expressed by Citi analyst Jim Suva when he listed five reasons why technology company stocks could rise this year. So here’s what I think and whether I’ll buy the stock.
1. India’s potential
China’s Covid lockdown and poor working conditions led workers to strike last month. As a result, iPhones are sold in many stores because of the large production from China. This causes urgency in management for various manufacturing sites.
So, India has now been identified by Apple as its next production site. Pair this with the lack of import taxes that companies have to pay to import iPhones from China, and I can see Apple stock benefiting from the move.
2. iPhone sales to grow
Along with that, Apple stores are also expected to open in India soon. Since more than 95% of countries use Android phones, the total addressable market for the world’s second largest population is incredible.
Although household incomes in the Asian subcontinent remain low, it is worth noting that India will be one of the fastest growing economies in the world over the next decade. This should look at affordability and discretionary spending. If the history of iPhone sales in China is anything to go by, India may be on the verge of a repeat. Therefore, I imagine iPhone sales will rise along with Apple’s stock this year.
3. AR and VR products
In addition to iPhones, Apple is expected to unveil its own AR/VR products. though Meta already known for overspending on Meta Quest, I believe Apple products will cost less to produce.
This is because the AR/VR kit was released to developers last summer. This allows programmers to build an ecosystem before tech giants pour a lot of capital into unfinished products. Therefore, a better application and a smoother interface will give consumers a better reason to buy the product. After all, Apple stock’s return on capital employed is 56%, double that of its closest tech rival.
4. Higher service revenue
In addition to products, the group also benefits from service revenue. This is the amount of revenue generated from app stores, music subscriptions, advertisements, etc. With more iPhones forecast to be sold this year, service revenue should also be seen after several quarters of decline.
5. Cash back
More importantly, the board continues to facilitate great returns for shareholders. Suva sees Apple potentially spending $110bn on share buybacks, which is almost 5% of its outstanding shares.
For these reasons, the Managing Director of Equity Research at Citi rates Apple stock as a ‘buy’, with a price target of $175. Considering that this represents a 30% upside from current levels, I would be interested in buying the stock soon.
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