There has been a lot of handwringing about Apple
Apple
, for a while now. The rap on the iPhone maker is that it has lost its mojo, revenue was down 4%, year over year in 2024’s first quarter, Chinese consumers are losing interest in its products and Washington has body-slammed it with antitrust charges.
Well, fear not. Steve Jobs’ brainchild is taking a breather. Just ask the ultimate authority on investing, Warren Buffett. His Berkshire Hathaway lists Apple as its largest holding. Although the financial behemoth has lightened its Apple position (selling 13% in this year’s first quarter), that appears merely to be a case of rebalancing and tax planning.
Buffett himself, appearing at Berkshire’s annual shareholder meeting May 3, told the crowd that Apple “is an even better business” than Coca-Cola
Coca-Cola
and American Express
American Express
, two other large investments his company has.
He added that it was “extremely likely” that Apple would remain Berkshire’s top stock holding by year-end. And “unless something extraordinary happens,” Buffett went on, Apple, Coke and Amex will be part of Berkshire’s portfolio “when Greg takes over this place”—referring to his designated successor as Berkshire CEO, Greg Abel.
Now, Buffett is far from a starry optimist, and despite his penchant for favoring long-term holdings, has been known to ditch underperformers. While it has hit some potholes of late, Apple is no underperformer.
Over the past five years, Apple stock is up fourfold. And while it dipped for much of this year, it has rallied over the past month and is just $8 below its late-2023 high. Its ascent reflects those of other Magnificent Seven members, with the exception of woebegone Tesla
Tesla
, whose shares have suffered from drooping car sales and Chinese competition.
True, Apple stock is more costly than the market in general, which is usually the case for tech giants. But not by a whole lot. Its price/earnings ratio is 29.7, just a bit higher than the S&P 500’s 25. And among other members of the mega-cap Mag Seven roster, Apple is a lot cheaper than Nvidia (79.4 P/E), Amazon
Amazon
(51.6) and Microsoft
Microsoft
(37.7).
One cloud for Apple is a recently filed U.S. Department of Justice antitrust action, which maintains that the company has a stranglehold on smartphones by, among other things, making it tough for customers to exit the Apple ecosystem. Who knows where this legal action will end up, but recall that DOJ went after Microsoft two decades ago on antitrust grounds, and the software maker remains a behemoth today.
Meanwhile, Apple’s strengths are considerable. The company’s services division posted impressive numbers in the first quarter. It is embarking on a big stock buyback ($110 billion). While iPhone and iPad sales have dipped, a turnaround is highly probable. A new iPad just came out, its first upgrade since 2022. Even more important, the new iPhone 16 is expected to launch in September, featuring a higher capacity battery, among other things.
For good or ill, Apple’s superpower is that it retains customers, year in, year out. Morningstar
Morningstar
analyst William Kerwin wrote: “We believe the firm is adequately reinforcing its stickiness with customers by adding new devices and services with which to lock them in.” He lauded Apple’s “wide moat,” meaning customer switching to non-iPhone products is hard, the essence of the DOJ suit.
Over time, downbeat assessments of Apple’s prospects have surfaced, such as when Jobs died. Each time, the company came back, and investors were rewarded.
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