Do you know if you put in $1000 into Apple Shares 10 years ago, what will it be worth today?
Reason 1: Global Presence
Apple product is not restricted to just 1 country. In fact it have global presence. Many followers from whole world. There’s still a lot of room to grow.
Reason 2: A retailer with exceptionally high profit margin
Most retail companies only able to enjoy 7-15% net profit margin. However, Apple able to achieve 26%, way higher than industry average.
As a retail gadget company selling phone, this is the moat Apple created. Throughout the past few years, Apple able to achieve around 40% gross profit margin.
To easily illustrate, let’s assume all profit is from iPhone, then this figure means every iPhone sold, Apple getting gross profit 43.8%, insane right?
What makes Apple so magical?
Apple have a unique proposition. If anytime in future Apple increase its product price, Apple fans will still continue to buy it.
Apple make it's own M1 Chip
Analysts estimate Intel sells about $3 billions in chips to Apple annually.
During November 2020, Apple announce using in house created M1 chip for Mac product, no longer rely on Intel chip. During that time, Apple personal computer is faster than any other high spec computer. In 2022 March 8, Apple unveils M1 Ultra, once again, world most powerful chip for personal computer. This draw giant leap for Apple.
Known sources reporting Apple can easily save $2.5 billion or more by self producing M1 chip.
What this means for investor like us?
Apple no longer depends on supplier for chips. Chips is the core component.
Apple can fully optimize the chip to produce best performance for its product.
Profit that Apple can earn will be a lot more.
Reason 3: 90% of Apple users are loyal customer
People just love the smoothness and quality of photo taking
People who use Apple normally will stick to it. They wont simply change to Android or other choices. They just get used to Apple ecosystem. They love Apple product for its brand name, high quality specs for camera photo taking, super smooth User Experience on touch screen and nice coloring.
In other word, Apple product itself generally attracting like minded group of people who willing to spend more money to buy into the quality, user experience, simplicity, secure from virus malware and clean brand image. This is why you see a lot celebrities using Apple product. At many countries, when they see their friend using Apple products, their friend normally define them as part of the group who are richer and more lifestyle demanding.
I still remember during the time iPad launch, my friend tell me his grandma use it to watch video. You don’t need to open user manual, or look for tutorial, already know how to use it. This the user experience that Apple can give to consumer.
Even at today (Year 2022), after a bunch of android tablet available in the market, iPad still the best choice of many people. Don’t believe? Ask your friend around you, they will tell you if your budget allowed, directly go for iPad, you won’t go wrong.
Graphic Designer and Video Producers Love Apple
Apple laptop and Mac is the top pick of Graphic designers and video producers. Simply because the screen coloring and performance of Mac make it a far better choice for them to do video, audio and graphic editing. They can carry out their project, making bulk editing and perform heavy processing without problem in Mac. But, the same kind of activity put at others such as Windows may go into issue like memory overload, hang, or even blue screen.
So basically, even inflation kick in, or due to whatever reason Apple gonna increase product selling price, these group of people still can buy without any problem.
Reason 4: Huge free cash flow for business to move forward
With $93 billion worth of free cash flow, it’s more than enough for Apple to acquire any company. They can also easily do any R&D and prepare to step into the next big trend that may eventually help Apple to become 10x more valuable than what they are right now.
Reason 5: Strong Ecosystem (also known as a moat)
Apple already have its own ecosystem iTunes, apple tv, iCloud, Siri,…. No point for existing Apple user to move out to other platform. They will just continue to stick to Apple ecosystem.
Steady income stream from subscription model. 2021 ended with 795 million paid subscribers. Its annual services revenue, which accounted for 19% of its top line in 2021. Right now Apple actively approaching media companies trying to get exclusive deal to show sports event at Apple TV, such as NFL etc. This move will definitely create even more new paid subscribers for Apple.
Reason 6: Apple into Electric Vehicle
Apple has been secretly making EV. They want to make EV with no pedal and no steering, full self driving. While this may need to wait till year 2024, it is a good sign Apple is doing something. Electric Vehicle market is huge, currently the only big player is Tesla, and that amount to not even 5% of the world car market share. If Apple manage to make it, growing another 10X from now is definitely possible.
Reason 7: Apple into Healthcare Industry
This is a huge industry with huge profit, likelihood for Apple to success in this is quite high.
Insanely High Net Profit
As a retail company, Apple is in fact doing very well. In fact right now Apple is the largest market cap company in the world.
$94.68b in net profit in 2021. Making Apple the world largest market cap company.
As a Malaysian, I compare Apple earning to the top company in Malaysia
Maybank Malaysia need to use 49 years to earn the same amount of money Apple earning in just year 2021 alone.