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Apple SWOT Analysis – Apple Inc. (NASDAQ: AAPL)



Apple (AAPL) designs and manufactures the iPhone, iPad, iPod touch, HomePod, Mac desktops & laptops, Apple Watch, and Apple TV. The company also designs operating systems for each of its hardware devices. Apple offers various services which include iTunes Store (music / movies / games), App Store, Apple Music streaming, iCloud storage, Apple Pay, and AppleCare customer support. The products are distributed through Apple's own retail stores, online stores, and through other retailers.

Apple has evolved into a dividend-paying growth company. Although the company's largest best-selling product, the iPhone, has been on the market since 2007, Apple still has the potential for new groundbreaking innovations. One of these innovations is the Apple Car, which is operating under the name, Project Titan. 2021

through 2025.

Apple's iPhone sales have been slowing down. Apple's decision to stop reporting sales of iPhone units added to that concern. Despite that concern, Apple will probably bounce back due to its customer loyalty, which is likely to lead to future iPhone upgrades. The longer-term catalysts are the development of new products as TV streaming and the Apple Car.

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Strengths

  • Apple has the competitive advantage of having a fully integrated ecosystem. The hardware, software, and services work together across devices in a user-friendly manner.

  • Reliable, easy-to-use performance of hardware and software.

  • Strong brand image – status icon / fashion brand.

  • High margins due to premium price strategy [gross margin 38%, operating margin 26.7%, EBITDA margin 30.4%].

  • High returns: ROE of 46% and ROIC of 17%.
  • Strong balance sheet – high quantity of cash, high stockholders equity.

  • 19659007] Continuing innovation – Apple updates current products on a regular basis to keep up with advancing technology.

  • Apple is about to launch a TV streaming service with original content this year.

  • Strong customer loyalty – Apple was declared the most pleasing company in most of the markets that it operates in. Apple came out on top for smartphones, tablets, and laptops. A survey by Morgan Stanley (NYSE: MS) shows that 92% of iPhone owners are somewhat or extremely likely to purchase another

 Apple Stock Chart

Weaknesses

  • Apple's products are priced too high for certain markets as China. The newest iPhones had prices cut 12% to 17% in China recently. Improper pricing could have a negative effect on product sales and allow to gain market share. Lowering prices could lead to lower margins.

  • Apple attracts customers from mid-to-high income levels. The high price of iPhones has been identified as "Apple products."

  • Apple has compatibility issues – One recent example of this is the latest version of Windows 10 which is not compatible with the latest version of iCloud. However, this has been resolved with iOS update. Opportunities

    • Opportunities

      • Apple should create strategic price points for different markets. For example, less affluent countries such as China and India may need lower prices as compared to U.S. to gain market share.

      • Develop new products / innovations – TV is streaming service with original programming. The company is striving to produce Emmy and Academy Award-worthy content. Project Titan (electric car) has the potential to be a strong seller. Apple should look at other new product opportunities for future growth.

      • Expand into new markets: Apple can look at emerging economies as new areas to market to. Apple's products.

      • Strategic M & A opportunities: Apple can seek out other hardware manufacturers for potential acquisitions. Products with high margins would be in line with Apple's products.

      • Apple stores, additional online stores, and more third-party sellers. [More] 19659026] Threats

        • Apple faces a lot of competition on the hardware side. iPhone competitors include Samsung (OTC: SSNLF), Huawei, LG Electronics Xiaomi HTC Microsoft (MSFT), etc. Lower-priced smartphones from Huawei have been eating into Apple's market share. Alphabet (GOOG) (GOOGL) remains the main competitor for the iOS with its Android operating system.
        • Apple thus faces a lot of competition for its other product categories. Apple's competitors can make it challenging for the company to grow market share. Therefore, Apple wants to make its products stand out from the competition.
        • The threat of tariffs could make Apple's products more expensive.

        • Rising labor costs could reduce margins: Wages have been rising in China where iPhones are produced. China's economy continues to grow

        Apple's Long-Term Investment Outlook

        Overall, I expect Apple to perform well over the long term. Apple still remains a brand that consumers aspire to. The company remains the only player in this space with a fully integrated ecosystem. Therefore, the company has the ability to make more revenue through the services segment (music & TV streaming).

        The stock does fall out of favor occasionally when worried about iPhone sales are on the minds of investors. Apple's stock is still recovering from the drop experienced during Q4 2018. The stock is attractive with a trailing P / E of 15.6 and a forward P / E of 14.8. This is significantly lower than tech giants Microsoft's and Alphabet's forward P / Es of 23.6 and 22, respectively.

        So, I see the current valuation as a good entry point for a long-term position. Even if sales are flat or slightly down, Apple still retains most of its customers.

        Even if iPhone sales are flat or slightly declining, Apple still retains most of its customers. Many of the loyal customers want to use Apple Services (the company's highest growth segment), which wants to contribute to the company's revenue growth.

        While the company's growth may experience a slight decline in 2019, earnings growth has the potential to return to a double-growth rate in future years (supported by consensus estimates). , Apple can capitalize on its wide range of users through its services segment.

        The company's growth rate can increase as a result of innovative products down the line. Apple's TV streaming service and electric car have the potential to produce a higher growth rate within the next three to five years and longer. Therefore, Apple has the potential to pay a dividend-paying growth stock for the long-term.

        When it returns to a double-digit earnings growth rate. Apple's dividend of 1.5% seeks help compound those gains if they reinvested or provide shareholders with income while holding the stock.

        I contribute to Kirk Spano's Margin of Safety Investing where we offer more in-depth analysis of individual companies. SWOT Analysis.

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        Disclosure: I am / long are AAPL. Business relationship disclosure: The article was written by David Zanoni with feedback from Kirk Spano.

        Additional disclosure: The article is for informational purposes only (not a solicitation to buy or sell stocks). David is not a registered investment adviser. Kirk Spano is at RIA. Investors should do their own research or consult a financial adviser to determine what investments are appropriate for their individual situation. This article expresses my opinions. Investing in stocks involves risk and could result in losses.


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