Apple probably needs no introduction, because almost everyone knows it. On the other hand, I'd like to follow some layout of my analysis, so let's introduce it. You may be surprised by some things that are obvious at first sight!

Basic overview

Apple $AAPL-2.3% is an American multinational technology company founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne. It is headquartered in Cupertino, California.

Apple specializes in the design, development, and sale of electronic devices, computer hardware and software , and online services. Its products such as iPhone, iPad, Mac, Apple Watch, AirPods, and software such as iOS and watchOS are icons in open innovation, simplicity and elegance. Services include Apple Music, Apple TV+, Apple News+, Apple Card and iCloud. And these are perhaps more important than many investors realize.

Apple is the market leader in smartphones, tablets and streaming media. Its products and services are widely used by individuals and organizations. Apple's total capitalization is more than $2.6 trillion, making it one of the most valuable companies in the world.

Apple

AAPL

$221.69 -$5.11 -2.25%

Capital Structure

Market Cap

3.4T

Enterpr. Val.

3.5T

Valuation

P/E

33.7

P/S

8.8

Open $224.50

Day range $221.34 - $225.69

52 week range $164.08 - $237.23

Apple's strategy focuses on innovation through simplicity, intuitiveness, high quality, and integration of hardware, software, and services with an unparalleled user experience. Services and advanced technologies are key growth opportunities.

Apple's products are designed and developed in-house, while most components are manufactured by external suppliers in China. Manufacturing is very global and technologically advanced, with an integrated supply chain.

Apple's main competitors include Samsung (hardware), Amazon $AMZN-3.1% (cloud), Microsoft $MSFT-1.6% (software) , Alphabet (services) and others. Apple faces pressure to innovate and grow created by rapid technological advances and competition in smartphones, tablets, services, etc.

Sector

The technology sector is huge and fast growing. It includes companies involved in the production of hardware, software and related services. The main sub-sectors include consumer electronics, computers and peripherals, communications equipment, semiconductors, software, IT services and internet.

Consumer electronics includes companies such as Apple, Samsung, Sony, LG and others that manufacture devices such as smartphones, tablets, TVs, players, etc. This segment is global and dynamic, influenced by rapid innovations in hardware, software, services and design. The key to success is to deliver unparalleled user experiences through elegant hardware and software.

Some of the major opportunities in the technology sector include cloud services, artificial intelligence, internet of things, virtual reality, advanced materials, renewable technologies and automation. These are sectors where, for the most part, Apple is missing the train at first glance.

The global market for technology is worth more than $8.5 trillion and growing at about 5% a year. The main growth regions are Asia, North America and Europe. The US remains the dominant force in technology in terms of innovation and venture capital investment.

The global technology market is expected to reach USD 8.7 trillion in 2023. This represents an annual growth of approximately 5-6%. Important sub-sectors such as cloud services, software as a service and artificial intelligence will grow even faster. This growth will be driven by business investment in digital transformation, an expanding middle class in developing countries and technology-dependent lifestyles.

By 2030, the global technology market is expected to reach a value of more than USD 13 trillion. This represents annual growth of up to 7% throughout this decade. Major revolutions such as artificial general intelligence, virtual and augmented reality, advanced automation and the ongoing electrical revolution will push technological boundaries and open up new opportunities for companies like Apple. And we all know Apple will milk this cow to the last drop. It may jump on the train later, but as always, it will do it perfectly.

A bet on services

When you say Apple, everyone thinks of Steve Jobs and the iconic flat phone. He, of course, still rules the world and brings in an incredible amount of money for Apple. But there's a segment that might be even more important.

Apple's services segment includes tools like the App Store, Apple Music, Apple TV Plus, Apple Arcade, Apple News Plus, Apple Pay, and iCloud. The company, facing a slight slowdown and decline in iPhone sales, has recently focused on services, and its new strategy seems to be succeeding.

Apple's services business ranges from the App Store to licensing fees. Service-based revenue, such as Apple Music, has recently grown. This subscription music streaming service has millions of subscribers and is now a strong competitor to incumbents such as Spotify.

Before the company's focus shifted to the services segment, wearable electronics and home devices were the mainstays in its results. This segment includes products such as AirPods, Apple Watch and HomePod.

Revenue growth from the services segment can also be attributed to the billions of dollars Apple is investing in research and development. This large budget goes towards developing hardware as well as creating more digital solutions for everyday life.

Current situation

Analysts expect earnings per share to grow at a rate of 10.3% over the next five years . If the multiple is unchanged and a 0.6% dividend is added, we arrive at an expected total annual return to shareholders of 10.9%. This is slightly higher than the long-term return of the broader market.

However, with just a slight reduction in the multiple, this yield would fall significantly. Moreover, analysts are somewhat positive on this point.

The company is undoubtedly quality. Apple always surprises and always delivers appreciation. However, it simply doesn't come out with the current valuation.

Big risk

Another big risk for Apple is search engine concerns. Google reportedly pays Apple $20 billion a year to be the default search engine on its devices. But there are two huge risks here. The first is that Google and Apple face a class action lawsuit claiming that this payment is an illegal monopoly practice.

Whether this proves true remains to be seen, but if it does and Apple is forced to develop its own search engine, it could represent a huge impact on Apple's profits. Given that the deal represents a fifth of Apple's profits, this is a huge risk.

In addition, Microsoft and Chat GPT are potentially launching a new search engine that could compete massively with Google. Chat GPT is a huge danger to any tech giants that miss this train.

Apple has channeled most of its shareholder returns through share buybacks. The company's outstanding shares are down 3.4% year-over-year. When factoring in the dividend, the company provided total shareholder returns of roughly 4%. The company is returning cash to shareholders, effectively all of its free cash flow.

However, it only achieves 4% in annualized returns to shareholders. I expect Apple to continue to be a massively profitable company, but we don't expect it to generate the kind of shareholder returns that would justify its valuation.

The fundamental question is probably whether Apple will come up with something new. With a gamechanger that would shoot them back into the limelight. It could be VR, it could be unparalleled AI or something else entirely. For Apple, I guess there's nothing to do but be surprised.

Do you have Apple in your portfolio?

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.