Apple is not a typical growth stock. Yet, its stock behaves like a growth stock and is up more than 500% over the last five years.
Bearish investors often do not accord enough respect for its iPhone leadership. It has and will be the foundation for Apple stock to attain newer highs.
We discuss whether investors should add AAPL stock now as it broke new highs recently.
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AleksandarNakic/iStock Unreleased via Getty Images Investment Thesis
Apple Inc. (NASDAQ: AAPL ) is one of the core holdings in our portfolio that we have held for over ten years. We have also not sold a single share. Moreover, we have taken the opportunity to add the stock whenever it retraces, as it has one of the strongest long-term uptrends among its peers. We don’t consider AAPL as a typical growth stock. It’s evident if we evaluate its historical revenue growth metrics and forward estimates. AAPL just doesn’t cut it as a growth stock. But, the main question is, does it have to be a growth stock to be worth a core holding in investors’ portfolios?
Bearish investors have often bemoaned that Apple’s revenue and earnings growth don’t track its share price performance. As a result, they think the optimism in its stock has gotten well ahead of itself. Well, they are right. Investors can refer to the chart below and observe that AAPL stock’s total return over the last five years amounted to 529.9%. However, its last-twelve-months (LTM) revenue CAGR is just 11.2% over the last five years. Moreover, its EBITDA CAGR read 11.3% over the same period. Apple’s revenue, EBITDA, and stock performance (5Y). But, these investors also fail to realize that AAPL’s dominance and leadership are not just attributed to its revenue and bottom-line growth. It may sound incredulous, but we believe that investors would find it hard-pressed to name another company with Apple’s iPhone leadership. We believe it’s one of the key reasons the stock performance is so consistent and predictable. Investors could hardly have gone wrong buying the dips in the stock over the last five years. We have also issued several buy calls over the last two months of coverage on AAPL stock. For example, we upgraded our rating to Buy on 1 October (up 26.5% from the publication date). We then followed up with a series of buy calls. Our most recent buy call on 23 November is up 11.4% , as we reminded investors to hop on as AAPL navigates the holiday season, its most important seasonal quarter.
AAPL stock has had a lot going in its way recently. Its stock is up 35.2% YTD, easily outperforming the Invesco QQQ ETF’s (NASDAQ: QQQ ) 26.9%. It has also managed to set aside Epic Games’ legal challenge for now. In addition, we also have noted positive developments in its supply chain as it continues to press on for its critical holiday sales season.
Therefore, we believe it’s an appropriate time to provide an update for Apple investors. In addition, Microsoft’s (NASDAQ: MSFT ) brief reign as the world’s most valuable company has been retaken by Apple, as its market cap reached $2.9T recently. Lastly, we discuss whether it’s an appropriate time to add AAPL stock. Apple’s iPhone is Now Leading in China
Counterpoint Research updated recently that Apple has now claimed the top spot in China’s smartphone market as of October. Apple’s global smartphone shipment share of 14% remains behind leader Samsung’s ( OTC:SSNLF ) share of 20% in CQ3’21. However, AAPL’s China sales grew 46% MoM as it overtook its peers to become the #1 smartphone brand in China. Apple took pole position as its share in China reached 22%, ahead of #2 Vivo’s 20%. Notably, Apple gained share while ” China’s smartphone market grew only 2% MoM in October.”
Counterpoint Research emphasized (edited): Apple’s success in its iPhone 13, with its strong brand equity, is gaining the maximum from the gap left by Huawei in the premium segment. Apple could have gained more if it were not for the chip shortages, especially for the Pro versions. But still, Apple is managing its supply chain better than other OEMs. Overall, the China market has been slow throughout the year and Apple’s growth is a positive sign. It indicates that Chinese smartphone users are maturing fast and are looking to buy […]