Apple Inc. (NASDAQ:AAPL) had some interesting twists this year, and the company might be making the right moves, further pushing growth capacity. We will analyze their approach towards competitors, new products and overall stock performance.
Apple is continuously innovating, and we are inclined to believe that they are looking to press on with innovation rather than reduce it. The statement by Apple's CEO in the recent Q3 earnings press release, gives this view some foundation, "We’re continuing to press forward in our work to infuse everything we make with the values that define us — by inspiring a new generation of developers to learn to code...".
Apple has been innovating both in the hardware and software segment. In Q3, the hardware category saw developments with their M1 chips backed new products, such as:
- iMac®, powered by the Apple M1 chip
- iPad Pro®, powered by the Apple M1 chip
- Apple TV 4K®, with a redesigned Siri Remote®
- AirTag™, an accessory that helps keep track of items using the Find My™ network
In the software realm, Apple introduced Apple Podcasts® Subscriptions, and announced iOS 15, macOS® Monterey, iPadOS® 15 and watchOS® 8.
The company has also been focusing on consumer privacy and has steered into protective features such as tracking opt-in policies for iPhone users, which in-turn generated some aggressive PR campaigns from competitors such as Facebook.com (NASDAQ:FB).
The largest factor behind the recent growth of Apple products may well be the iPhone 12 and the iPhone 12 mini. As the company outlined in their previous discussion of risk factors (page 6), "...competitors have broader product lines, lower-priced products and a larger installed base of active devices. ...competitors have aggressively cut prices and lowered product margins."
It seems that Apple has the right idea in releasing the iPhone 12 mini as a more affordable option for consumers. This action serves at least two purposes:
- Consumers have the option to buy a trusted and original Apple product versus a cheaper alternative that may seek to replicate some Apple features.
- Apple will be tapping in the lower margin market, which it has largely been avoiding. This will both fuel sales growth, and return the blow to competitors that have been draining Apple's market share.
With that, let's see Apple's current performance for stockholders and get a better perspective for what the future entails.
Investors who held Apple Inc. shares for the last five years, gained 442%.
On top of that, the share price is up 15% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Apple achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is lower than the 40% average annual increase in the share price. This suggests that market participants hold the company in higher regard.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Apple has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
Apple provided a total stock return of 35% over the year (including dividends). That's fairly close to the broader market return.
Strategically, it seems that Apple is introducing lower margin products targeted at an untapped consumer base. This can directly penetrate a portion of the marketshare of some competitors and possibly reduce their competitive power.
The recent moves which Apple is making are meticulous, aggressive and in sync with shareholder interests.
To truly gain insight, we need to consider other information, too. Even so, be aware that Apple is showing 1 warning sign in our investment analysis , you should know about...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.