Is Apple A Buy During The Stock Market Sell-Off?

From its all-time high, this tech giant's stock has dropped about 15% since 2022.

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Consumer spending on tech was curtailed by 2022's macroeconomic headwinds, leading many of the world's largest companies to see their stock prices decline dramatically.

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As Apple's (AAPL -0.44%) stock price dropped nearly 27% last year, it managed to outperform other FAANG components, such as Alphabet and Amazon, which suffered stock price declines of 39% and 49% in 2022, respectively. Its stock recovered partially in 2023 and has increased 19% so far this year. There is still much to be done, however. Investors who hope to benefit from this project have a buying opportunity.

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Apple has always provided reliable, long-term gains thanks to its robust, reliable business. Apple's stock is a screaming buy during a sell-off. 

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In its iPhone segment, Apple maximizes profits

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A reported 52% of Apple's revenue in fiscal 2022 came from its iPhone segment, and 19.8% from services. Therefore, Apple's outlook is likely to improve if it maximizes profits in its smartphone business.

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Trade Algo reported in January that Apple plans to produce more iPhone components in-house and move away from relying on other companies for components. Rather than partnering with Broadcom and Qualcomm, the tech giant will develop its own Wi-Fi/Bluetooth chip. As early as 2024, Apple is expected to switch from Samsung and LG screens to custom displays. As Apple ends costly partnerships with outside companies, it will likely boost profit margins by using more internal components.

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According to Apple's Mac lineup, custom tech components have been successful in the past. Earlier this year, Apple announced it would stop using Intel processors in its Macs in favor of its own chips known as Apple Silicon. In Q4 2022, Apple's Mac revenue grew 62% from $7.1 billion in the third quarter of 2020 to $11.5 billion.

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By controlling every component of Apple's computers, Apple's Mac chips contributed to the company's improvement in profit margins. In addition to offering far better battery life, these end products are faster than their predecessors. If Apple treated its highest-earning segment similarly to its iPhones, it could see a significant boost in revenue.

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Developing new markets

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Apple diversifies its revenue and expands beyond iPhone products to strengthen its business.

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It is reported that the company will launch an augmented/virtual reality (AR/VR) headset later this year, expanding its product lineup. By 2030, the augmented reality market is forecast to grow at a compound annual growth rate (CAGR) of 40.9%, according to Grand View Research. At the same time, the VR market is expected to grow at a CAGR of 15%. Taking advantage of the emerging market's growth, Apple's brand could allow it to make substantial profits. 

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Furthermore, the company relies less on product revenue because of its rapidly growing services business. It is estimated that Apple TV+, Music, and iCloud services will generate $78.1 billion in revenue in 2022, which is a 14% increase over last year's revenue, double that of the iPhone. A profit margin of 71.3% was achieved within the segment, while a margin of 36.3% was reached within the products segment.

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As Apple expands its product line and adds digital services, it adds another layer of protection to its cash cow by maximizing its profits in its iPhone segment. Apple's stock has fallen 15% from its high since a sell-off took place, making now an excellent time to invest.