4) Apple Inc. (NASDAQ:AAPL)
Number of hedge fund holders: 184
Apple Inc. (NASDAQ:AAPL) designs, manufactures, markets, and sells smartphones, personal computers, tablets, wearables, and related accessories.
High customer switching costs, intangible assets, and network effects around the company’s iOS ecosystem continue to strengthen Apple Inc. (NASDAQ:AAPL)’s competitive positioning. The company is expected to be supported by a higher mix of premium products. These include iPhone Pro models which should help improve gross margins moving forward. The market is quite optimistic about its new product, the iPhone 16, and the launch of Apple Intelligence. Generative AI acts as a perfect fit for the seamless experience of using iOS products.
Apple Inc. (NASDAQ:AAPL)’s attached services – which include App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – help the company realize higher margins and a recurring revenue stream which should help improve the value proposition for hardware products, and the financial profile. Apple Intelligence is expected to drive accelerated product upgrade cycles and should result in increased demand for Apple services. The company’s investment in AI, with the launch of the new Apple Intelligence platform, should accelerate its future growth by improving user experiences throughout its ecosystem.
The company released results for 3Q 2024, with revenues reaching $85.78 billion (a record). This exhibits a rise of 5% on the YoY basis. This growth primarily stemmed from a 14% growth in services revenue, which touched an all-time high of $24.21 billion. Services such as iCloud, Apple Music, and the App Store have supported the tech giant in achieving financial success, exhibiting its ability to perform well even in a challenging environment.
Bank of America reissued a “Buy” rating on the shares of Apple Inc. (NASDAQ:AAPL), giving it a price target of $256.00 on 5th September 2024. As per Insider Monkey’s 2Q 2024 data, 184 hedge funds were long Apple Inc. (NASDAQ:AAPL).
Baron Funds, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“The Fund’s chief relative detractor was Apple Inc. (NASDAQ:AAPL), even though it was a meaningful contributor to absolute performance, as we added to our Apple position significantly during the period. We bought Apple well, but in 20/20 hindsight we didn’t buy enough. Because Apple has an oversized weight in the Benchmark (its average weight was 15.7% for the period), when Apple’s stock outperforms (it appreciated 23.0%), it has generally been a headwind to relative performance. Our Apple underweight accounted for 33% of our relative underperformance for the period.
This quarter we increased the size of our position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shifts, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on-device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
