How Safe Is Apple's Stock In 2023?

The iPhone manufacturer may have a successful year this year.

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Throughout the past ten years, Apple (AAPL -1.34%) stock has generated gains that have helped investors grow wealth. When the iPad first came out in 2010, if you had invested $1,000 in Apple stock, you would currently own $20,230. And it comes after a 15% decline in stock price last year.

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With new products and a rising installed base of devices, Apple still has a lot of opportunities ahead of it, but the company reported a drop in sales in the quarter that ended in December. This performance may have some investors questioning if one of the most well-known names in the world is really a safe company to keep in the event that the economy enters a recession, as some analysts are projecting.

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The case for purchasing Apple shares this year, however, is stronger than the case against doing so.

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The importance of Apple's wide range of products

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The prospect of a recession appears to be problematic for the sales of pricey computer goods. As the iPhone accounts for nearly half of Apple's annual revenue, a recession would probably be bad for the company. The fiscal first quarter's 8% year-over-year decline in iPhone revenue was mostly caused by macroeconomic factors.

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The management ascribed the drop in iPhone sales to changes in foreign exchange rates, supply issues, and macroeconomic challenges including inflation. Without foreign exchange, iPhone revenue would have remained constant from the prior year's quarter.

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But other categories performed strongly in a quarter while the iPhone suffered. iPad sales increased 29% year over year and accounted for 8% of all sales for Apple. Services, which make up 18% of overall income and include app sales & subscriptions, saw a 6% annual growth.

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The appeal of Apple's industry is that it has a loyal following of customers who adore their iPhones. The technological behemoth developed a flawless hardware and software integration that continuously results in excellent customer satisfaction. One of the main inducements for users to purchase at least two devices has been Apple's iCloud, which keeps the applications running on Macs, iPhones, iPads, and Apple Watch all in sync. This has resulted in a diversified revenue stream.

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Around 2 billion devices are currently installed for Apple, which is a significant increase from just seven years ago. In 2023, the company will have a few growth catalysts thanks to this.

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Apple's growth drivers are forming

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Apple is finally anticipated to introduce its mixed-reality headset this year, utilizing virtual reality (VR) and augmented reality (AR) technologies, after years of conjecture and rumors. According to a February story from Trade Algo, the corporation decided to wait until June to make the announcement at Apple's Worldwide Developers Conference.

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This is significant news for a number of reasons, including the likelihood that Apple's customer base has grown significantly since the company's last major product, the Apple Watch, debuted eight years ago. This implies that a new product launch could have a greater influence on sales than earlier launches.

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Yet, a successful launch will depend on the software's quality and usability, not to mention its cost. Yet, Apple's emphasis on both hardware and software design may turn their anticipated headset into a game-changing AR/VR device.

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Even without the prospect of a new product introduction, the company's growing installed base is a compelling argument for considering holding the stock. Revenue from higher-margin services is increasing, which is gradually increasing its contribution to the top line. This will eventually provide Apple with a more recurring revenue source other than relying on iPhone upgrades, helping to smooth out the sporadic drops in revenue from its hardware products.

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Buy Apple stock now.

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With $64 billion in net cash, Apple has a balance sheet that resembles a fortress. It also produces around $100 billion in free money annually, giving it plenty of funds to support expansion plans and provide dividends to shareholders.

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According to this year's estimated earnings, Apple's price-to-earnings ratio of 25 is not cheap, but it is reasonable when compared to the share's previous trading history as well as other blue chip stocks. Overall, given the future catalysts that could not be fully accounted for in its value, I would rather not sell Apple stock.