The rise and rise of S&P 500 stock Apple (NASDAQ: AAPL) is hard to understate. The share price has risen over 200 times in value this century on the back of innovation after innovation. Genuinely world-changing products have underpinned the company’s performance. The iPhone has a claim of being the best invention in a generation.
But all that is changing, isn’t it? Apple is no longer a company that is upending industries, but a mature enterprise focused on maintaining market share and smaller growth. Anyone looking for iconoclastic breakthroughs and a surging share price needs to look elsewhere, don’t they?
I’m not so sure. While it hasn’t hit the mainstream like an iPad or its line of smartwatches, Apple has quietly made huge strides with one of its most recent developments, a sign that the company may still be a force to be reckoned with in the years to come.
Chips, chips, chips
The development I am talking about is the M1 chips that are now being used in Apple’s MacBook line. These chips are adapted from designs by Cambridge firm Arm Holdings that are usually used in smaller devices like smartphones.
The main draw of the M1 chips is that they are more efficient. What does that mean in practice? Well, the new MacBooks offer better performance, don’t get as hot, and offer much better battery life.
I have a pre- and post-M1 Macbook sitting around me now and the difference is night and day. The newer version literally never overheats, the performance is terrific, and I count the battery life in terms of days rather than hours. Oh, it’s half the thickness, too. Taking it out and about is a breeze.
From Apple’s perspective, the chips are made in-house rather than bought from Intel, which means cost savings thanks to the integration.
The net benefit is that these M1 chips have boosted the Apple share price upwards. The shares are up 127% in the last five years (roughly corresponding to when the chips were unveiled).
A buy?
Pulling off a string of innovations is an impressive feat, but it might not be repeatable forever. Yes, Apple has a terrific track record in this department. No, it is not guaranteed to last.
One might also ask how big the premium on the shares is for all the inventiveness. The Cupertino-based tech giant boasts a forward price-to-earnings ratio of around 31. That number might sound on the high side, but it’s close to the S&P 500 average these days, which has ballooned to around 30.
Anyone considering buying should also look into other areas of the business. Demand for the new iPhone is very strong, which has sparked some of the recent run-up. This doesn’t come as a surprise to me as Apple’s products tend to be the best in class, year after year.
After recent gains, I’m happy with my exposure to the firm, so I won’t be buying any more of the shares. But this truly is a stock I hope I’ll be holding for a long time, maybe even forever.
