Apple (AAPL) — Not A Good Time To Buy

Latest Analyst Opinions and Stock Analysis

Invesdea 💰 Investing Ideas
4 min readSep 9, 2023

Latest Analyst Opinions

🔸 Morgan Stanley: We believe that’s unlikely that recent China iphone restriction headlines will evolve into something broader. Huawei’s 5G smartphone shipments will be greatly limited by supply constraints (and potential further technology restrictions), and iPhone curbs by the Chinese government aren’t necessarily new, reportedly having begun as far back as 2020. Apple is also a critical contributor to China’s economy, employing — directly and indirectly — millions of Chinese workers through device production, app development, and has helped build an entire supply chain. Said differently, while China is critical to Apple’s success, Apple is also critical to the Chinese economy, and therefore while the potential for a broad decoupling between Apple and China in this multipolar world clearly exists, we don’t believe recent headlines are necessarily foreshadowing this “worst case” scenario. As a result, we’d conclude Apple’s recent stock move is indeed overdone as it implies Apple loses ~70% of its iPhone shipments in China, a highly draconian and unlikely scenario.

🔸 JP Morgan: The China restrictions are coinciding with the recent launch of Huawei Mate 60 Pro (e.g., Huawei’s 5G smartphone), and the restrictions will make it tougher for Apple to continue to deliver share gains in the local market

🔸 Bank of America: As per SensorTower data, App Store rev increased +9% y/y in F4Q23; Overall App Store trends improved y/y in August both Globally and in the US. We maintain Neutral as positive catalysts of new product introductions (AR/VR headset & iPhone 15) is offset by a potentially weaker consumer spending environment in 2H23 and the emerging threat from actions taken by China.

🔸 CFRA: We expect sales to rise 6.8% in FY 24 with the upcoming iPhone 15 cycle poised to help drive higher demand. We believe that Services will accelerate, benefiting from higher installed base, China momentum, and improving app store/gaming/digital ad growth. We expect AAPL’s entry in foldable smart devices to finally arrive in CY 24, driving upside to iPads/ iPhones looking ahead. Also, the greater wealth effect in emerging regions like India, where AAPL is heavily investing, is poised to reap higher revenue.

🔸 Morningstar: Wide-moat Apple reported solid results for its fiscal third quarter and provided investors with a flattish outlook for the September quarter. We maintain our fair value estimate of $150 per share and view shares as overvalued. We’re encouraged by Apple’s success in reaching 1 billion paid subscribers for its services businesses, but still struggle to foresee the company as being more than a mid- to high-single-digit revenue grower in the long term.

Stock Analysis

Business Description

Apple designs and sells various consumer electronic devices and software used in these devices. Its main products include hardware like smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), AirPods, and software like Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Fitness, Apple Card, and Apple Pay. It competes in Hardware, Semiconductors, SaaS, FinTech, Gaming, and AI markets.

Financial Results Highlights on 8/3/23

🏦 Revenue: $81.8B, -1% y/y

💸 Net Income: $19.9B, or 24% of total revenue

🔸 Next Quarter Outlook: y/y performance similar to current quarter

🔸 Launched Apple Vision Pro

🔸 iPhone Revenue: $39.7B, -2% y/y

🔸 Services Revenue: $21.2B, +8% y/y

🔸 Mac Revenue: $6.8B, -7% y/y

🔸 iPad Revenue: $5.8B, -20% y/y

🔸 Wearables, Home and Accessories Rev: $8.3B, +2 y/y

🔸 All-time revenue record in Services driven by over 1 billion paid subscriptions

🔸 Generated operating cash flow of $26 billion, returned over $24 billion to shareholders

Bullish Opinions

🔸 Profitability: Apple has high profit margins and substantial cash reserves. Apple’s vertical integration capabilities also enable its products to tend to have more controllable quality and higher profit margins.

🔸 Switching Costs: The exclusive and complete iOS system ensures that the Apple product experience is unique and makes it difficult for users to leave this system.

🔸 Network Effect: Apple’s software and hardware are in the same ecosystem and can work together.

🔸 New Markets: Apple’s AR/VR and iPhone 15 are coming soon. At the same time, Apple is also expanding its influence in emerging markets, such as India.

🔸 Intangible Assets: Apple has a strong brand effect and a loyal customer base.

🔸 Share Buybacks: The board of directors recently authorized share repurchases of up to $90 billion.

Bearish Opinions

🔸 Geopolitics: Recent news says iPhones will be banned in certain regions/industries in China.

🔸 Growth: Apple’s quarterly revenue declined sequentially despite the high inflation environment. Sales of Macs and iPads have fallen particularly hard.

🔸 Macro Environment: Apple’s main revenue comes from the sales of consumer electronics products. However, consumer electronics products are particularly affected by the macro environment.

Conclusion: Neutral

Although profitability is strong, it has yet to find new revenue growth points. At the same time, tension between China and the US might make Apple’s revenue even worse.