Apple (AAPL -1.75%) has been an investor safe haven throughout 2022 as various tech stocks have plummeted, but the iPhone manufacturer has been comapratively unscathed. While companies such as Microsoft, Alphabet, and Advanced Micro Devices have seen their share prices fall between 30% to 58% since January, Apple’s stock has dipped a more moderate 14% year to date.
The stock market sell-off has resulted from reduced consumer spending thanks to rises in inflation and interest rates. However, Apple’s ability to weather a market downturn makes it a company worth an investment. The media has projected a doom-and-gloom attitude when reporting on Apple over the past few months, but the company has continued to prove that wrong.
After Apple posted better-than-expected fourth-quarter results on Oct. 28, critics might be more convinced of its long-term prospects. As a result, now might be the best time to invest in Apple stock.
Weathering the storm
Since January, consumer spending has slowed significantly, with the tech industry one of the hardest hit. For example, the smartphone market saw a 9.7% year-over-year decline in Q4 2022, with Apple’s 1.6% increase being the only growth across the industry. The growth is even more impressive, considering the quarter would have only included about a week of sales from its recently launched iPhone 14 lineup.
Jusy Hong, a senior research manager at industry tracking company Omdia, said in a report that Apple’s positive performance is “because its consumers are typically loyal and high-income customers,” suggesting they have been less affected by rising costs of living. Hong’s comment has been corroborated by multiple reports that the iPhone 14 Pro models are vastly outselling the base versions. Apple CEO Tim Cook revealed on Oct. 27 that the company has been “constrained” and “chasing supply” when trying to meet the demand for the iPhone 14 Pro and Pro Max.
Moreover, Apple’s Q4 2022 saw revenue grow 8% from the year before to $90.1 billion, with multiple segments outperforming Q4 2021. Its iPhone segment’s revenue of $42.63 billion beat the previous year’s $38.87 billion, while Q4 2022’s Mac revenue of $11.51 billion also improved on Q4 2021’s $9.18 billion. With several companies in the PC market suffering from reduced demand, Apple’s 25% growth in its Mac segment proves the potency of its products, as consumers’ preference for MacBooks shined in a quarter that meant going back to school for many consumers.
Apple hasn’t been entirely unaffected by market downturns. Chief Financial Officer Luca Maestri said the company expects Q1 2023’s sales rate to “decelerate.” Additionally, despite all other segments experiencing growth, its iPad revenue declined year over year from $8.25 billion to $7.17 billion. However, it was also the only segment not to receive any new products since September 2021.
The iPhone company continues to beat analyst expectations, proving its dominance and ability to persevere no matter market conditions.
Long-term growth through services
In addition to well-performing product segments, Apple’s services business continued to show its crucial role in the company’s long-term growth. In Q4 2022, the segment grew 5% year over year from $18.27 billion to $19.19 billion. Service’s growth slowed from the same quarter the year before because of decreases in consumer spending. However, its 70%-range margins and planned price increases could see it become the core of Apple’s future growth.
Apple’s services segment includes platforms such as Apple Music, TV+, Fitness+, Arcade, News+, and iCloud+. Since the first quarter of 2019, the business has grown 76%, currently the company’s second-best-performing segment and making up 21.3% of its revenue in Q4 2022.
Despite a slowdown in growth, Apple’s price hikes in the segment could help safeguard it against further declines in consumer discretionary spending. Apple Music has increased by $1 to $2 per month based on individual or family plans, while Apple TV+ has also seen a $2-per-month price bump.
The Apple TV+ price hike is especially promising as, despite its content library growing significantly since it launched in November 2019, its new price of $6.99 a month still prices it lower than its biggest competition. Netflix‘s and Disney‘s Disney+ upcoming ad-supported tiers will be $6.99 and $7.99 per month, respectively, while Apple TV+ is priced the same or lower with no ads.
As a result, Apple is in a prime position to continue attracting consumers further into its ecosystem through its services and top-tier devices.
Now is the time
Apple stock rose almost 8% on Oct. 28 after the company posted its Q4 2022 earnings. Investors rallied over its ability to report growth despite so many of its competitors experiencing steep declines. Consequently, Wall Street might begin flocking to Apple for a secure investment away from the more risky areas of the market.
So now might be the best time to invest in Apple stock before it sees sharper rises in the coming weeks.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet (A shares), Alphabet (C shares), Apple, Microsoft, Netflix, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
