Apple’s Paradox: Record Stock Despite Fading Growth

John Smith

Apple (NASDAQ: AAPL) is facing a paradox that has never been seen before: the value of its stock has hit amazing new highs, but sales growth has stopped. After rising more than 50% in 2023 to more than $2 trillion in market value, Apple just recently had its first annual gain of $1 trillion.

But the company’s year-over-year sales have been going down for four quarters in a row because iPhone sales have stopped growing and there isn’t a clear new growth engine.

Apple’s amazing run could come to an end if it doesn’t come up with its next crazy-great invention soon. This is because its core iPhone business is getting older and rivals are catching up.

Everyone is now looking forward to the reported Apple Vision mixed reality headset, which is set to come out next year. However, it’s still not clear if augmented and virtual reality technology is ready for prime time.

The Stark Reality Behind Apple’s Trillion Dollar Year

Apple’s paradox shows how its record-high value doesn’t match up with the basics of its business. The market value of the stock has grown by more than $1 trillion just this year.

To give you an idea of how much money Apple has made, this one-year gain is more than the overall value of companies like Tesla, Berkshire Hathaway, and Nvidia.

Apple, on the other hand, has different sales and earnings. In fiscal 2023, sales dropped 3% to $394.3 billion across all major product groups. This was the first annual drop in sales that followed a rise in sales in over 15 years.

People didn’t buy as many iPhones or Macs, so sales went down 2% and 13%, respectively. Services, which were once a big growth driver, only saw a 9% rise. Apple is having a hard time starting real growth again since sales are only expected to grow by less than 4% in fiscal 2024.

The main reason Apple is having trouble growing is that the global smartphone market is getting older. Since 75% of Americans now have smartphones, the time between upgrades is getting longer.

IDC thinks that the number of smartphones shipped will only go up by 1.4% a year until 2027, because people are keeping their phones longer. China is also becoming more and more crowded, so Apple could lose its competitive edge if it doesn’t find a new way to stand out.

All Eyes on Apple Vision as Next Potential Growth Driver

To Apple’s credit, the stock’s skyrocketing rise shows that the company is sure it can come up with new ideas to get out of its growth rut. A VR/AR headset reported to be made by Apple and called “Apple Vision” is expected to be the company’s next big hit.

Apple Vision, which is set to come out in 2024, aims to connect cutting edge technologies like VR with everyday uses. The lightweight headset promises immersive mixed reality experiences for conversation, consumption, and work. It has advanced displays, cameras, and processors.

Apple Vision could be the next big thing in computers. If it comes out, it would be the company’s first new product line since 2015. RBC says that if it works, it could create a new $82 billion market by 2025. Meta is also counting on its troubled Meta Quest Pro headset to help the company grow outside of social media.

But augmented and virtual reality face big problems because they have failed in the past. Even though Microsoft, Google, Snap, and others have put a lot of money into the area, it is still very new and hasn’t made any money yet. Motion sickness, high prices, and a lack of “killer use cases” are all big problems that Apple Vision needs to solve.

Can Apple’s Services and Wearables Pick Up iPhone Slack?

Aside from Apple Vision’s promise, investors hope that growth in services and wearables can make up for the slow iPhone market. But neither business is safe from cracks that start to show.

Services brought in $85 billion for Apple in fiscal 2023, with sales made through the App Store leading the way. The company’s services grew by 9%, which was faster than its overall growth, but it was also the slowest growth rate in years because customers didn’t like the higher prices on contracts.

Without more iPhone users, services will have a harder time keeping up double-digit growth if they don’t add many new features.

In the same way, demand for AirPods and Apple Watch seems to be slowing down after huge gains during the pandemic. Last year, Apple’s devices business dropped 3% to $40 billion. This was due to problems in the supply chain and consumers’ lower spending.

Wearables are still the early winners in their fields, but companies like Samsung and Google are making them much more competitive, which is also hurting Apple’s lead in this area.

The Road Ahead – Can Apple’s Innovation Engine Reignite?

Apple is losing streams to make up for the inevitable maturation of the iPhone as sales growth slows in major groups. Since there doesn’t seem to be a silver bullet either, Apple will have to rely on good old-fashioned innovation to drive its next phase of growth.

Apple still has a lot of strengths that it can use, such as the highest profits in the business, a base of over 1.8 billion devices around the world, and the tools it needs to keep making more money from services.

Its Apple silicon chips are still being used in more PCs, and new areas like payments, health technology, and automated systems give it new opportunities.

But Apple is facing its toughest test in years to deliver the level of ground-breaking innovation that built its power in a market that is becoming more and more competitive. For investors who don’t see real ways to speed up revenue growth, incremental growth probably won’t be enough longer.

In the end, Apple is just a bet that it can make insanely great goods that change categories again instead of becoming a slow-growth utility. All eyes are on Apple to see if it can write the next chapter in its history of destroying the universe. Apple Vision is ready, and the company has a trillion dollars to add to its war chest.

Share This Article
John Smith is a veteran stock trader with over 10 years of experience in the financial markets. He is a widely followed market commentator known for his astute analysis and accurate predictions. John has authored multiple bestselling books explaining complex market concepts in simple terms for novice investors looking to grow their wealth through strategic trading and long-term investments.
Leave a comment