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Should You Invest in Apple? Is It Too Late to Buy Apple Stock?

Apple (NASDAQ: AAPL) stock is coming out of a solid growth year, with its shares climbing 48% in 2023. Still, the company faced macroeconomic headwinds, resulting in declines in consumer spending and product sales. Revenue for the company’s fiscal 2023 saw a 3% year-over-year decline.

Despite its recent challenges, Apple, a technology juggernaut with substantial financial resources, remains resilient. The company’s stock growth reflects investors’ enduring confidence, even in the face of challenging market conditions. Although Apple is currently in a slump, this downturn is unlikely to be perpetual.

Navigating Market Headwinds

Over the past two years, macroeconomic shifts led to reduced discretionary spending and subdued annual upgrades to devices, impacting Apple’s product segments. In fiscal 2023, iPhone net sales fell by 2% year-over-year, while Mac revenue plummeted by 27%, and iPad sales slid by 3%. These declines were symptomatic of a broader trend, as global smartphone shipments nosedived by 11% in 2022 and continued to fall for most of 2023, alongside similar declines in other tech markets.

Recent data suggests that the industry may be rebounding, with IDC reporting a 7% increase in smartphone shipments in the fourth quarter of 2023, marking the first rise in over a year. This recovery trend is projected to persist this year and expand by almost 4% in 2024.

Patience is the Key

Despite declining product segments, Apple accumulated nearly $100 billion in free cash flow last year—a testament to its financial strength and potential to surmount current headwinds. Encouragingly, the company bolstered its research and development spending by nearly $4 billion last year, accounting for about 8% of its revenue. Notably, this is the highest percentage spent on research in at least 20 years.

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Apple’s increased R&D expenditures signify the company’s commitment to innovation and future growth. The last time it allocated a higher percentage to research was during the iPhone’s inaugural release, mirroring the scale of ambition for its iPod business.

AAPL Research and Development Expense (% of Annual Revenues) Chart

Data by YCharts

While Apple’s long-term roadmap remains ambiguous, it will likely involve burgeoning industries such as artificial intelligence (AI) and virtual/augmented reality (VR/AR). The AI sector is projected to achieve a compound annual growth rate (CAGR) of 37% through 2030, potentially exceeding a value of $1 trillion. Similarly, VR is on a robust growth path, expanding at a CAGR of 29% over the same period.

Apple’s CEO, Tim Cook, has hinted at the company’s significant focus on AI, with reports last year indicating the development of a large language model resembling OpenAI’s ChatGPT.