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Apple (NASDAQ:AAPL) shares remain one of the most traded stocks, but the company has not shown as much volatility as its tech peers.
Having said that, recent performance has been unusually poor. The stock has fallen 20% in the past year. But it is worth noting that tesla it has fallen 64% in the same period.
Despite the drop, Apple is still worth $2.14 trillion. To put this in context, that’s equal to the GDP of Brazil, a country with a population of 214m. It was the first company to achieve a stock market valuation of $1 trillion (2018), $2 trillion (2020) and $3 trillion (2022).
So let’s take a look at how successful a two-year investment in Apple would have been, and explore where the stock price might go next.
2 year yield
In two years, Apple shares rose 5%. Clearly, that’s not good for a stock that barely pays dividends.
One thing that would have helped my investment is the weakening of the pound. It is about 10% weaker against the dollar today than it was two years ago. This means that my investment of £500 two years ago would be worth around £570 today.
However, he would probably be scolding me for not selling last summer when the stock price was around 25% higher than it is today.
What is moving the stock price?
The stock performed unusually poorly in 2022. This is largely due to bearish market conditions as a result of high inflation and rising interest rates, sparking fears of a recession.
However, the fourth quarter demonstrated that Apple was able to buck the trend and outperform the market. It posted a record September quarter, with revenue of $90.1 billion, up 8% year-over-year, and quarterly earnings per diluted share of $1.29, up 4% year-over-year.
First-quarter results, due to be released on February 2, could send the stock price higher if the company proves even more resilient.
There are several positive aspects to consider at this time as well. Apple’s share of the smartphone market has increased from 14% in 2017 to 16.5% in 2021. Margins also remain strong, with gross margins increasing from 41.8% in 2021 to 43.3 % in 2022.
Despite the inflationary environment, the “China plus one” strategy can also preserve margins in the long run. Like other companies, Apple is reducing its dependence on China, mainly for geopolitical reasons.
But its new production centers in India and Vietnam offer much cheaper labor costs than in China, as well as incentives tied to production. This could allow contract manufacturers such as foxconn, sticky Y wintron – all now producing in Tamil Nadu – to reduce production costs.
So would you buy Apple shares? I’m definitely keeping a close eye on the tech giant. It’s one of Warren Buffett’s favorite firms, so that’s definitely a positive.
But my main concern is the weakening of the dollar and that could wipe out any rise in the share price in pound terms. As such, I’m not buying yet.
