4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders In Q2 2024: 184
Share Price Target Upside: 23%
Share Price Target: $273
Apple Inc. (NASDAQ:AAPL) is the world’s largest technology company in terms of revenue and market capitalization. With roughly $1.46 billion people using an iPhone worldwide, the phone is the bedrock of Apple Inc. (NASDAQ:AAPL)’s hypothesis. This is also evident through the fact that 52% of the firm’s revenue comes from smartphones, and its sizeable user base has also allowed Apple Inc. (NASDAQ:AAPL) to build a tertiary Services business capable of generating $78 billion in revenue annually. The user base is baked into the firm’s share price, and Apple Inc. (NASDAQ:AAPL)’s value is based primarily on its ability to ensure regular iPhone upgrades by keeping users in its fold through a closed ecosystem and unique design. It has also meant that the shares have managed to avoid Wall Street’s AI jitters in 2024, as while enterprise AI players like MSFT are down by 7.9% since the July peak, Apple Inc. (NASDAQ:AAPL)’s shares have lost just 1.70%. The ability to monetize AI and ensure regular upgrades are the two pillars of Apple Inc. (NASDAQ:AAPL)’s hypothesis.
Baron Funds mentioned Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter. Here is what the fund said:
“Recent Activity This quarter we re-initiated a 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 shis, 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.”
