Apple Inc. (Apple) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories and sells a range of related services. The company’s products include iPhone (52.1% of FY22 revenue), Mac (10.2%), iPad (7.4%), wearables, home, and accessories (10.5%) like AirPods, Apple TV, Apple Watch, HomePod, and others. The company also has an online services business (19.8%), which provides services like 1) operating platforms like the App Store and iTunes, which allow customers to purchase and download applications and digital content; 2) offering digital content through subscription-based services, including Apple Arcade, Apple Music, Apple News+, Apple TV+, and Apple Fitness+; and 3) providing a range of other services, such as AppleCare, iCloud, Apple Card, and Apple Pay.

Investment Overview

New XR products to be a new growth driver. Apple’s XR products are expected to be launched in early 2024. We expect it to be another phenomenal product for Apple on the back of its high user loyalties and product quality. According to market estimations, the number of units estimated to be sold in 2024 would be c.500,000 units and the price per unit would be US$3,499. The sales value would be US$1.5bn in 2024 and is expected to grow at 98% annually, according to GlobalData Forecasts. The company is expected to reach c.US$64bn in sales in 2030, accounting for 12% of total revenue. The promising XR product is going to be a new growth driver for Apple in the coming five years.

Progressive premiumisation to support growth. While the volume growth of iPhone, iPad, and iWatch would become less robust along with the incremental penetration rate, which was seen over the past few years, we believe future growth will increasingly depend on price hikes for the company's products. Apple has done a good job in the premiumisation of its products by launching the “Ultra”, “Max”, and “Pro” series for its current products. iPhone has succeeded in hiking prices over the past few years, from an ASP of US$733 in FY20 to US$876 in FY22. News from industry research stated that the coming flagship iPhone model “iPhone 15 Ultra” would cost US$200 more than the iPhone 14 Pro Max. We expect Apple’s successful premiumisation to support the overall products’ ASP hike and moderate revenue growth for the coming few years.

The technology breakthrough in semiconductor design. Apple not only continues its innovative advancement across different product types but has also achieved technological breakthroughs in semiconductors in recent years. In November 2020, Apple unveiled its first ARM-based silicon chip, the “M1”, and moved away from Intel chips previously used on Mac computers. The silicon-based Macs have a much better performance overall than those with Intel-based chips, including faster performance, better battery life, and heat efficiency. Designing its own chips was a win for Apple, which no longer had to depend on Intel's chips, and it led to better performing products. Mac sales rocketed 31% in 4Q20 after the M1 launch. Apple has already dropped the M series chips into the iPad Pro. We expect Apple to continuously advance the technology of their self-designed chips for other devices, including iPhones, Apple Watch, and other headset models in the future. This will support Apple in keeping its competitive edge across all its product.

New product launch delays may harm Apple's growth. After the market forecasted the delay of the XR headset launch until early 2024, Apple has also scaled back on its ambitious self-driving plans for its future electric vehicle and postponed the car's target launch date to 2026, as Bloomberg News reported. The delay in its cars is expected to be due to it lacking manufacturing partners. The difference in the supply chain between consumer electronics and electronic vehicles is causing uncertainty in this giant project of Apple. The uncertainty may decrease the visibility of the contribution from the vehicle product in the long run.

AAPL’s share price has outperformed the NASDAQ YTD because of its iPhone shipments and market share surpassing that of the global smartphone market. We expect AAPL to achieve steady growth driven by the success of its promising premiumisation and leading product technology in the long run.

@MillionaireTiger @Daily_Discussion @TigerEvents @TigerStars 

DYODD