It hasn’t been an easy year for Apple (NASDAQ: AAPL). The iPhone maker faced several headwinds, including an antitrust lawsuit and slower sales of its most important device in China. Still, Apple’s stock performance in 2024 hasn’t been terrible, not by a long shot. The company’s shares are up 20% year to date, barely trailing the S&P 500. How will Apple perform through the end of the year and beyond? The company’s next quarterly update on Oct. 31 might move the needle one way or another.
Let’s find out whether it’s worth purchasing Apple’s shares before that date.
Will Apple Intelligence have an effect?
One reason Apple did not perform well in the first part of the year is that investors and analysts saw that it was trailing its similarly sized fellow tech leaders in the important artificial intelligence (AI) industry. However, the company has never sought to be first to market. Apple has usually found ways to put its own ingenious spin on existing products and services to attract customers. In June, the company finally announced how it would integrate AI into its business.
Apple announced Apple Intelligence, a suite of AI-related services that will be available on some of its devices. These features will only be for users of selected devices, including the iPhone 15 Pro, the latest iteration of the company’s smartphone, the iPhone 16, and various newer versions of some of its other famous brands. Most of these features aren’t out yet. They will be released (in a somewhat limited capacity) later this month. But during Apple’s next earnings update — for the fourth quarter of its fiscal year 2024 — it will be interesting to see how much sales of the iPhone grew compared to the previous few periods.
In the nine months ending June 29, iPhone sales declined by 1.2% year over year to $155 billion. If they move in the right direction by a substantial margin, that might be a clue that people are buying what Apple is selling — at least, that they’re purchasing those versions of the iPhone where Apple Intelligence will be available. The company could experience a robust cycle of renewals as a result, boosting iPhone sales and overall top-line growth.
It could also attract new customers into Apple’s ecosystem. The company has an installed base of more than 2.2 billion devices — it hit new all-time highs across the range of its gadgets and in most geographical regions during its latest period. The growth of Apple’s installed base is essential for its future, since it helps fuel revenue growth within its high-margin services segment. The more people are plugged into its ecosystem, the more money it can squeeze out of it.
Apple could also benefit from its upcoming quarterly update if it simply beats on revenue and earnings. If it can do that while showing that it’s starting an exciting cycle of renewals thanks to Apple Intelligence and growing its installed base simultaneously, its shares will almost certainly jump.
Here’s an even better question
It’s hard to predict what will happen. Those who buy Apple’s shares now expecting them to rise on the heels of its quarterly update might or might not be disappointed. So, for those considering investing today, the better question is whether Apple can still deliver solid returns over the long run, regardless of what happens on Oct. 31. In my view, the tech giant still can.
Apple’s most important assets are its innovative abilities and large and growing user ecosystem. The first will allow it to identify and successfully pursue new growth opportunities, while the latter grants it umpteen monetization opportunities while helping to improve its margins and bottom line over the long run. There are many other reasons why the business still has attractive long-term opportunities. Apple’s brand name — one of the world’s strongest — grants it a powerful competitive edge, and the company is a decent income pick.
True, its forward dividend yield of 0.44% isn’t impressive — the average for the S&P 500 is 1.32%. However, the tech giant has increased its dividends by almost 113% in the past 10 years and boasts a low (perhaps too low) cash payout ratio of 14.56%. There is ample room for more dividend hikes. Between Apple’s dividend and growth opportunities, there are enough reasons for long-term investors to purchase the company’s shares right now. Don’t put too much stock in Apple’s upcoming quarterly update.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,121!*
-
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,917!*
-
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $370,844!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 14, 2024
Prosper Junior Bakiny 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.
Should You Buy Apple Stock Before Oct. 31? was originally published by The Motley Fool
