It makes a lot of sense that a lot of companies are normalizing back to pre-pandemic values because people are slowly easing back to normal life. This has led to crashes of 20-80% for many companies.
AAPL is still up ~100% since the pandemic. What are the reasons why AAPL won't drop back down too?
Here are my 6 reasons:
- People severely underestimated how much impact the Trump administration destroying Huawei phones had on Apple. Apple benefited hugely as people bought iPhones instead of Huawei. In China, Apple is now the #1 smartphone maker again. Two years ago, I would have said this is impossible because of how strong Chinese phone makers have been and have been growing. In hindsight, the moment Trump announced the ban was the moment AAPL should have exploded.
- 5G super-cycle came during the pandemic
- Superior supply-chain management during the pandemic allowed Apple to gain permanent market shares. In the US, the iPhone has surpassed Android in marketshare and is accelerating, which I thought would never happen again.
- Mac transitioned to Apple Silicon during the pandemic, which is beating the pants off Intel and AMD chips in performance and performance per watt. Apple is now the fastest-growing computer maker and they're just getting started. The PC market is $150b/year, and Apple only has an 8% market share. If Apple is able to gain 20 to 30%, that's a very respectable increase in revenue.
- Apple is expected to eventually enter some of the hottest markets during the pandemic which were electric vehicles, self-driving cars, and the metaverse. While existing companies in those markets have dropped off, Apple hasn't even released a product for them yet. This means AAPL never actually caught the hype for these categories during the pandemic.
- Investors never really caught onto Apple's new strategy until recently which involves gaining market share and selling services. Apple is no longer just serving the premium markets. The old saying “Apple products are overpriced” is no longer true. For $330, you can buy a new iPad. $250 and get the iPhone SE. $400 and get an iPhone SE. And I'm guessing Apple is planning a cheap Macbook SE to take PC market share too. These are excellent value products and serve as the entry points into Apple's iron grip ecosystem. Once you're in with one product, you can't get out. Next thing you know, you're buying Airpods every 2 years, subscribing to Apple Music, getting Apple Fitness+, upgrading to a Macbook Pro, using Apple Pay which gives Apple a % of the transaction, buying virtual items in stupid mobile games, etc…
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