Investors may be a bit hesitant to take a swing on Apple(NASDAQ: AAPL) at this time. Not only have the company’s revenue and earnings been relatively stagnant since 2022, but the stock’s continued gains during this stretch have also bolstered the risk of a pullback.
If you’re on the fence about stepping into a new stake in the iPhone maker, you might just want to hold your nose and dive in anyway. Although the stock is expensive and growth in some of its business segments has been nonexistent lately, there’s still plenty working in this consumer-technology titan’s favor. Four factors stand out among the rest.
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As of early this year, the last time the company disclosed the number, more than 2.2 billion Apple-made devices were in use around the planet. The vast majority of them are presumably iPhones, although it stands to reason that fans of the popular smartphone also opt for other iOS devices that allow for a fairly seamless user experience.
That doesn’t make the iPhone the world’s most popular mobile device — not by a long shot. Data from GlobalStats indicates there are more than twice as many Android-powered devices in use worldwide today than there are of Apple’s operating system.
Don’t let this lesser reach fool you, though. While Apple’s user headcount may be smaller, these users are far more active users of their devices. They’re also bigger spenders. Recent numbers from Sensor Tower suggest iOS users collectively spend more than twice what Android’s users do, meaning on a per-person basis iOS users shell out four times as much in an effort to make the most of their mobile devices. Moreover, the second quarter’s iOS app spending was up 13% year over year, easily outpacing spending growth via Android, and extending a well-established trend.
This continued progress is ultimately an indication of how “sticky” Apple’s digital ecosystem is, of course. Once people begin to use it, they want to use it more and more.
And this stickiness has value beyond the ongoing growth of Apple’s services revenue. Although actual sales growth — as measured by unit as well as revenue — is nil right now, the company’s flagship product boasts a big number of repeat buyers. Bloomberg Intelligence reports Apple’s consumer loyalty rate is above 90%, versus Android’s at only 80%. This jibes with similar data from Consumer Intelligence Research Partners that says more people are likely to switch from an Android device to an Apple-made one versus the other way around.
Again, it’s a testament to the strength of Apple’s digital ecosystem. Users don’t want to abandon all of their app purchases as well as their familiarity with iOS.
Although the iPhone has been a workhorse for Apple since debuting all the way back in 2007, there’s no denying the company’s become a bit too dependent on the popular smartphone. It now makes up about half of Apple’s top line.
Before jumping to the conclusion that the company is simply sitting on its hands, though, you might want to take a closer look. It is working on new products and profit centers that matter.
Take the Arm-based A18 processor chip Apple designed for its AI-capable iPhone 16. While its initial use will be powering the on-board artificial intelligence features of these newest smartphones, the company is reportedly looking to leverage this technology within data centers, thrusting Apple into a business it’s never been in. Although it remains to be seen what this business might look like for Apple (presuming it enters it at all), the prospect is credible.
Let’s also not forget that Apple is still tinkering with augmented reality glasses and goggles, and even though it pulled the plug on the project early this year, it was still willing to commit time and money to electric vehicles on the chance that they might be worth it. Indeed, it’s encouraging that CEO Tim Cook is able to see that some projects just aren’t going to pan out and are worth abandoning even after millions have been poured into them. It frees up resources for more promising prospects.
Finally, go ahead and plow into Apple stock despite its recent strength simply because the company’s name still carries an enormous cachet. Kantar’s BrandZ report for 2024 places the value of Apple’s brand name above all others, mirroring branding consultancy Interbrand’s stance that Apple is once again the world’s single best global brand.
So what? In and of itself it doesn’t mean much — brand names alone don’t pay the bills. All companies must ultimately generate revenue that turns into profits.
Being able to leverage the world’s most powerful brand name, however, is a clear competitive advantage. Consumers may not be quite as interested in sticking with the iPhone if it wasn’t something of a status symbol — just as ChatGPT developer OpenAI may not have been quite as interested in directly integrating its tech into newer iPhones had Apple been any other consumer technology name.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
