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Down 31% last year, is it time to buy Apple stock?

Smiling white woman holding iPhone with Airpods in ear
Image source: Getty Images

As one of the biggest companies in the world, Apple (NASDAQ:AAPL) stock is always on my radar. Unfortunately, I missed the boat on buying shares prior to the massive increase from 2020 onwards.

However, with the share price down 31% last year and its lowest price since mid-2021, I think now could be the time for me to add Apple to my portfolio. Here’s why!

The king of resilience

Despite Apple’s share price dropping by almost a third, the company has fared quite well over the past year. In a year where nearly every company had massive share price drops, Apple’s decrease has been rather tame.

Meta is down 63%, Amazon 50%, Alphabet 38%, and the list continues. Compared to its contemporaries, Apple’s price has held relatively steady.

The company faces the same economic uncertainty and risks as other tech behemoths. However, Apple has spent the last several years aggressively diversifying its revenue.

In the mid-2010s, iPhone revenue grew so quickly that a drop in sales would significantly impact the bottom line. From 2015-2018, nearly 70% of the company’s revenue came from iPhone sales in any given quarter.

Tim Cook saw the writing on the wall, and Apple has grown its revenue in two key areas since: services and wearables. The company’s services segment is the fastest growing. It has gone from just 6% of revenue per quarter in 2015 to nearly 24% this year. Apple’s services include the App Store, Apple Music, iCloud, and Apple TV+.

Similarly, wearables have gone from less than 3% of revenue in 2015 to as high as 12% in recent years.

The company has been aggressively expanding its offerings to cater to users who don’t upgrade their iPhones yearly. That could be because there’s no need to upgrade or because people are tightening their belts, but it doesn’t matter to Apple.

In the most recent quarter, just 49% of its revenue came from iPhone sales. Services, wearables, iPad, and Mac made up the other 51%.

In 2023, Apple doesn’t need to sell users an iPhone. It will happily sell them subscriptions, AirPods, Apple Watches, iPads, and Macs to accompany the device they already have. That’s why I’m confident Apple can weather the storm of an economic downturn better than some of its peers.

Good value

Since the price of Apple stock has gone down, so too has the price-to-earnings (P/E) ratio. Currently, Apple’s P/E sits at an attractive 21. At its 2020 peak, Apple’s P/E hit 35. To me, that makes the current Apple share price of $125 very enticing.

Apple also has a 12-month average price target of around $171 per share. I think that’s reasonable based on the company’s sustained revenue and profit growth. Since 2019, net profit has nearly doubled from $55bn to $99bn.

After considering the current share price, and the broader economic factors, I think Apple is a must for my portfolio. I plan to begin buying shares in the business now that we have entered the new year. I think it’s a company that could be a staple of my portfolio for years to come.

The post Down 31% last year, is it time to buy Apple stock? appeared first on The Motley Fool UK.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Matt Cook has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet and Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2023