Apple (NASDAQ:AAPL) shares have been less volatile than most other tech stocks over the past year.
If I had bought £1,000 of Apple stock a year ago, today I’d have more money than I started with. The stock is up 8%. So as the company is listed in the US, if I had bought $1,000 of shares, today I’d have $1,080.
But my portfolio is in GBP and the pound has sunk against the dollar over the past 12 months.
A year ago, £720 would have got me $1,000. But today, $1,080 would get me £883. So my investment would have yielded a 22% increase. A great return considering what’s been going with tech stocks!
But, would Apple still be a good investment for my portfolio? Let’s take a closer look.
Earnings report
Apple released its Q3 earnings report on Thursday and beat analysts’ expectations. The firm registered record Q3 revenue of $83bn despite concerns about flagging consumer confidence and the impact of inflation. Analysts expected $82.7bn in revenue.
Earnings per share came in at $1.20 versus $1.16 expected.
iPhone and iPad revenue both beat expectations by some distance, driving profitability up during the quarter. Apple had previously said it was keeping iPhone production flat throughout 2022 amid an increasingly challenging environment. The news will also be positive for chip makers such as Taiwan Semiconductor Manufacturing.
However, despite the record revenue, Apple reported net income fell 10.5% year-over-year as costs increase and lockdowns in China hit sales and production.
Would I buy Apple stock?
So, firstly I think there’s one major issue with me investing in US stocks right now. And that’s the weakness of the pound. I know the forecast for the US economy is generally more positive than European nations, however I wouldn’t expect the pound to depreciate much further against the dollar. As such, I am wary that any gains in the share price would be wiped out by fluctuations in the exchange rate.
But more specifically to Apple, I’m actually fairly bullish on the firm. The company has an impressive hold over the market for top-end electronic devices and there is real excitement when Apple releases its latest products. Apple is widely expected to launch its iPhone 14 line along with its Apple Watch Series 8 later this year.
Naturally, the interplay between Apple’s products and services increases a consumer’s reliance on the company’s offerings. Trying to ween oneself off Apple products is difficult! I’ve often thought about it but I’d have to swap my iPhone, iPad and Mac all at the same time to keep that interconnectivity going.
It’s also worth recognising that Apple gets around a quarter of its revenue from services. Services refers to things like Apple Music, Apple Fitness+, Apple News+ etc… All of which reduces Apple’s reliance on hard tech. Morgan Stanley suggests that the services segment could help push the company’s valuation back over $3trn.
I actually wouldn’t buy Apple for my portfolio right now, and it’s not a reflection on the company’s strength. I actually see the share price going up over the next year. But I think it would be wiped out by exchange rate fluctuations.