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Why Apple Stock Is the One Tech Name Every Investor Should Hold for the Next 10 Years

Now may be the time to consider adding to a position in Apple over the long-term

By Chris MacDonald, InvestorPlace Contributor May 29, 2024, 6:25 am EDT

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  • Apple (AAPL) remains a top tech stock long-term investors will want to own and not trade moving forward.
  • The company will unveil new AI features for its iOS suite at the Worldwide Developers Conference on June 10. 
  • Apple’s future trajectory will largely depend on its ability to innovate, something that’s been called into question recently.
Apple stock - Why Apple Stock Is the One Tech Name Every Investor Should Hold for the Next 10 Years

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A very well-known blue chip stock, Apple (NASDAQ:AAPL) has seemed to be facing some challenges this year. Apple is now fourth in the Chinese smartphone market due to stock struggles and declining sales. The company’s high price attracts some consumers, but global brands still lead.

The thing is, Apple is much more than a smartphone maker. The company has a suite of products and services (high-margin services at that) investors continue to focus on. Apple’s growth has slowed, as evidenced by recent data out of China. However, the company’s upcoming WWDC24 event in June could spur greater interest.

Here’s what I think long-term investors should focus on when it comes to Apple, and why this is a stock I’d hold for the next decade.

iPhone Stabilization

Wedbush’s latest research indicates that Apple’s iPhone demand is stabilizing, based on recent Asia supply chain checks. The firm raised Apple’s stock price target to $275, anticipating a significant AI-driven iPhone 16 upgrade cycle. This stabilization signals a promising future for Apple’s AI integration.

Wedbush’s research suggests Apple’s AI integration could add $30 to $40 per share, leveraging its 2.2 billion iOS devices. Their Taiwan checks showed Apple’s supply chain outperformed expectations in April, possibly due to inventory builds for upcoming Chinese holidays. 

Wedbush expects Apple will establish an AI App Store, boosting Services growth as developers create AI-driven consumer apps.

The AI Opportunity

Apple has been focused on investing in R&D over the long-term. However, since 2019, the company has already spent $100 billion on this line item. Every year, Apple spends $1 billion for AI development and research.

According to Luca Maestri, Apple’s CFO, the company has followed a hybrid investment model. It has collaborated with tons of suppliers to deliver new AI services most cost-effectively.

This strategy enables Apple to enhance AI capabilities without bearing the full expense of building an AI infrastructure alone.

If the company can integrate AI features into its products that resonate with consumers, the market opportunity could be massive. Indeed, Wall Street predicts Apple’s earnings to reach $8.01 per share by fiscal 2026, suggesting 30% upside if the company’s price-earnings ratio remains stable.

These projections might undervalue AI’s impact on iPhone demand, making Apple a potentially undervalued stock. 

Launching AI Practical Functions

Apple Inc. planned to showcase its AI developments at the WWDC from June 10-14. Bloomberg reported that Apple might reveal Project Greymatter, an AI tool for integration into apps like Safari, Photos, Notes, and operating system functions.

Apple’s new AI features focused on practicality, including “smart recap” to summarize missed notifications and messages for user convenience.

Apple considered incorporating third-party AI features into iPhones, including discussions with Alphabet about integrating Google’s generative AI. Licensing Google’s AI, particularly its Gemini model was seen as a cost-effective strategy for iOS enhancements.

Concurrently, Apple developed its chips for local AI tasks on iPhones, avoiding cloud data transmission. 

Unlike rivals Microsoft and Google, which monetize AI via subscription plans, Apple aims to boost premium iPhone sales with AI advancements in iOS 18, encouraging upgrades and increasing revenue.

Own, Don’t Trade AAPL Stock

Despite its recent underperformance, I think Apple remains a top tech giant that’s worth considering as a portfolio staple over the next decade. Sure, growth has slowed. It’s going to slow when any company gets to Apple’s size (trees don’t grow to the sky).

But with the company’s continuing cash flow and buybacks, there are reasons why investors stand to be rewarded for holding this stock over the very long-term. I do think Apple has what it takes to grow into its current multiple over time.

Investors are clearly willing to pay up for security. If that’s the case, AAPL stock could be poised to outperform over the coming years relative to many of its higher-growth peers.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/why-apple-stock-is-the-one-tech-name-every-investor-should-hold-for-the-next-10-years/.

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