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As one of the largest companies in the world, Apple (NASDAQ:AAPL) stock is always on my radar. Unfortunately, I missed the boat when I bought the stock before it went up a lot starting in 2020.
However, with the stock down 31% last year and at its lowest price since mid-2021, I think now might be the time to add Apple to my portfolio. This is why!
King of power
Even though Apple’s stock price dropped by nearly a third, the company has been on a roll for a long time. In a year where nearly every company saw its share price decline, Apple’s decline was relatively tame.
Meta down 63%, Amazon 50%, Alphabet 38%, and the list goes on. Compared to its contemporaries, Apple’s price remains stable.
The company faces the same economic uncertainties and risks as other tech behemoths. However, Apple has spent the past several years aggressively diversifying its earnings.
In the mid-2010s, iPhone revenue grew so fast that a drop in sales would have had a significant impact. From 2015-2018, nearly 70% of the company’s revenue came from iPhone sales in a given quarter.
Tim Cook saw the writing on the wall, and Apple has grown revenue in two key areas since then: services and wearables. The corporate services segment is the fastest growing. It has gone from only 6% of revenue per quarter in 2015 to almost 24% this year. Apple services include the App Store, Apple Music, iCloud, and Apple TV+.
Additionally, wearables have gone from less than 3% of revenue in 2015 to 12% in recent years.
The company is aggressively expanding its offerings to cater to users who don’t upgrade their iPhones every year. This could be because they don’t need to upgrade or because people are tightening their belts, but it doesn’t matter to Apple.
In the most recent quarter, only 49% of revenue came from iPhone sales. Services, wearables, iPads, and Macs comprise 51%.
In 2023, Apple will not need to sell iPhone users. Will be happy to sell subscriptions, AirPods, Apple Watches, iPads, and Macs to accompany existing devices. That’s why I believe Apple can weather the economic storm better than some of its peers.
Good value
Since Apple’s stock price has fallen, so has its price-to-earnings (P/E) ratio. Currently, Apple’s P/E sits at 21. At the peak of 2020, Apple’s P/E will reach 35. To me, this makes Apple’s current share price of $125 very attractive.
Apple also has a 12-month average price target of around $171 per share. I think that’s reasonable based on the company’s continued revenue and profit growth. Since 2019, net profit has almost doubled from $55bn to $99bn.
After considering the current share price, and broader economic factors, I think Apple should be in my portfolio. I plan to start buying shares in the business now that we have entered the new year. I think this is a company that can be a staple of your portfolio for years to come.
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