Stock picking

Why Apple shares are the most loved by Warren Buffett

Apple shares are Warren Buffett's favorite shares.
It is no coincidence that the stock of Cupertino's most famous big tech represents 49% of Buffett's $318 billion stock portfolio.
Apple is a technology giant known not only for its iconic products but also for its dominant presence in consumer markets.
As he said earlier this year, “Apple is different from other businesses we own.
It's just a better business.” Let's understand in more detail why Warren Buffet has accumulated Apple shares over time and believes that there is still potential for price growth in the long term.
Why Apple shares are Buffett's most loved Warren Buffett is known for his predilection for companies with lasting competitive advantages and Apple has everything it takes to be the investor's favorite.
There are at least 3 reasons why Buffett invested so much in this company.
1) Customer loyalty The Apple brand was the second most valued in the world in 2023: strong consumer loyalty gives it unparalleled pricing power.
Buffett, in a recent interview with CNBC, underlined this aspect, highlighting the fact that few companies can boast the same loyalty as consumers.
With a base of more than 2 billion active devices, Apple manages to monetize through a wide range of services, including the App Store, Apple Pay and subscriptions such as Apple Music.
This sustained competitive advantage is one of the reasons (but not the only one) why Buffett chose to invest so heavily in this company.
read also 1 stock to buy as passive income.
It is Warren Buffett's favorite 2) Diversification and revenue growth Apple's strength is not just limited to the smartphone sector.
The company has achieved leadership positions in various consumer markets, from smartphones to PCs, from tablets to smartwatches.
With a 55% market share in phones in the United States and a 16% worldwide share, Apple leads the smartphone industry.
This diversification offers Apple a path to sustained growth, as the broader consumer electronics market is expected to grow 6.6% annually through 2030.
Additionally, sales of steadily increasing mobile app and payment services they represent a double-digit growth opportunity.
3) Positive opinions from analysts Analysts and experts from the main investment banks appreciate Apple despite the recent decline in quarterly revenues.
Apple beat profit expectations in its fiscal fourth quarter, although overall results fell short of expectations, with a 1% decline in revenue to $89.5 billion.
The company has faced several challenges, including declining Mac and iPad sales and a shrinking Chinese market.
Despite this, Apple's strategies to maintain profitability, such as growth in high-margin services sales and stock repurchases of more than $15 billion, are receiving praise from analysts.
Despite the cautious outlook for the next quarter, investors should take into account the success of iPhone sales (+2.8%) and services (+16%).
The prevalence of "Buy" recommendations (64.2%) by the main investment banks reflects confidence in the stock, with an average 12-month target price of $201.13, suggesting new historical highs.
Is it worth buying Apple shares? Investing in Apple stock might seem tempting considering the company's success story.
The stock, listed at just $22 in 1980 on the Nasdaq, has risen 2,000% over the years (and 800% in the last five years alone).
The constant increase in prices has made Apple shares an attractive option for investors, on a par with the best-known safe investments, especially after the stock split in 2021 which made the stock more accessible even for small investors.
However, there are risks to consider.
Despite the positive trend in 2023 (+44%), the current valuation of the shares, with a multiple of almost 30 times earnings, above the five-year average, raises concerns.
Although earnings growth is expected to be 9.8% per year over the long term, the valuation multiple seems excessive and inconsistent with the current premium.
These factors could push investors to think carefully before buying Apple shares, perhaps waiting for a more favorable price in the future.
DISCLAIMER The information and considerations contained in this article should not be used as the sole or primary support on which to make investment decisions.
The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon.
The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.

Author: Hermes A.I.

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