Company Information

Apple is a company that manufactures mobile communication devices, personal computers, and other wearable goods and accessories.

Executive Summary

Investment Thesis

Apple Stock is a strong buy that will continue to appreciate in share price and one that will pay a reliable dividend.

Although iphone sales declined, we saw a huge increase in Apple’s service business as well as there wearables business and the trend is likely continue especially with Christmas and Hannukah right around the corner. Reiterated Thesis: Buy Apple

Investment Merits

Sticky Consumer Base and Brand Loyalty: Apple’s renowned brand has transformed the company name, products and functionality into a lifestyle, and thus, has created a strong following and sticky consumer base. The quality of products has allowed high satisfaction from consumers, which adds to the company’s stickiness of customers. 

High investment in R&D: Apple has constantly increased its spending on R&D on all of its products, which have lead to continued improvements in products and services, ultimately generating demand for the newest models. Spending a significant amount of capital on R&D has allowed Apple to produce highly sought after, quality products and continue to be a leader of innovation in all of the highly competitive markets it is in.

Investment Risks

It’s estimated that about $28 billion of Apple’s total $46 billion in services revenues in FY’19 came via commissions – essentially taking a cut of app sales, subscriptions, and traffic acquisition payments from search engine providers such as Google. That’s a whopping 60% of services revenue. These service spaces are where Apple could face antitrust risks given its market power in this space. Secondly, digital services providers may also stop in-app subscriptions from Apple devices to bypass Apple’s cut, just as Netflix did in early 2019.

○This year, Apple has been hit with a lawsuit from Fortnite maker Epic Games and an antitrust investigation from the European Commission into its App Store rules, as well as the threat of a similar case from the US Department of Justice.