In the last few decades, society has seen a tech revolution. The way in which we live has changed forever. One company that is a major shareholding of Warren Buffett, which has undeniably been a leader in this change, is Apple (NASDAQ: AAPL). When it comes to mainstream consumer electronics, Apple has defined the last two decades, culminating in being the first company valued at $3 trillion just a few weeks ago.
However, in accordance with company heritage, it continues to innovate and lead the way with new products. Airpods, smart watches and streaming services have been recent examples of this. Without a doubt, Apple will continue to innovate and find new revenue streams from which to grow.
There is no doubt that Apple is a great company. However, is it a good investment for me, as a Foolish investor with a long-term view?
Warren Buffett certainly thinks so, with around 50% of Berkshire Hathaway’s shareholdings being a huge stake of Apple, valued around $160bn. He has “put his money where his mouth is”, which suggests I should do too.
Let’s look at the bull and bear cases for Apple going forward.
Bull case
The bull case for Apple relies partly on continued domination of the market. Maintenance of its market share relies on consistent ability to update systems, software and improving products currently on the market. Moreover, the societal attitudes towards Apple products must continue to be strong. The fact that Apple can bring out new iterations of the iPhone yearly and continue to lean on consumer loyalty is a huge pull, with revenues from the iPhone to the tune of $39bn in the fourth quarter of 2021 alone. This is one side of the business that is fundamentally sound.
Other products currently on the market have seen growth: the Airpods and streaming services (Apple TV and Apple Music) are both promising sources of revenue. If they continue to grow, it would only further add value to the company.
For an exaggerated bull case, Apple needs to continue to innovate. Bringing out new products and services will be central to growth in the decade to come. After all, this is the fundamental of most tech companies. The ability to grow is paramount to positive movements in share price.
Bear case
The bear case for Apple in regards to share price could be a result of market repricing of growth companies in favour of value investments, as well as a reduction in liquidity due to hawkish policy-making in order to fight inflation.
In the very worst case, a fall in market share — or a change in the way society responds to Apple products such as the iPhone — would be devastating for the company.
Conclusion
Considering the recent poor performance of US ‘Big Tech’ stocks, paired with the current market correction, this could be a great opportunity for me to follow Warren Buffett and invest.
The fundamentals are solid and the scope for future revenue growth is substantial. I like this company and think this is my time to get in.
