Apple (AAPL) stock has sagged lower alongside the rest of the market amid a renewed fear of rate hikes, inflation, and a coming economic slowdown. While the macro picture has gotten a lot weaker in recent months, one can't help but notice that Apple has pulled the curtain on many disruptive innovations.
Some of these innovations are more than just intriguing concepts. They're potential cash cows that could fuel the next leg of earnings growth.
Even if the U.S. economy is bound to fall into a recession in 2023, Apple has a lot of catalysts up its sleeves that could offset economic pressures on the horizon. Simply put, Apple is innovating at a rapid pace, and it's this innovation that will help the firm make a huge splash in the fintech and enterprise segments.
Indeed, Apple has recognized where there's economic profit to be had. With such powerful network effects on its side, Apple can out-innovate rivals in an efficient manner. Now, Apple may not be a first-mover, but it is a firm that knows how to reinvent things remarkably well.
Apple's Hardware, Software, and Services Businesses Could Offset Recessionary HeadwindsAs the company doubles down on financial services, with Apple Pay Later (or Pay in Four), Apple Tap to Pay, and even a possible hardware subscription service, we could witness the next era of the company's Services push.
Under CEO Tim Cook, Apple is fully-focused on delivering the best hardware, software, and services. It's the Services segment that's shined and what could be key to Apple's next round of multiple expansion.
As Services growth ramps up, hardware and software are not about to slow down.
On the hardware front, the big mixed-reality headset could be as little as a year away from launch. The exciting project, which has been years under development, was recently demoed to the board.
WWDC 2022 also showcased amazing new innovations on the software front, with iOS 16 and macOS Ventura. Also, unveiling its M2 chip and a redesign on its Macbook Air. Indeed, Apple is not slowing down.
As Apple puts the finishing touches on its headset, in what could represent the biggest hardware innovation since iPhone, it could prove hard to keep Apple stock in the $130-140 range through 2023.
There are a lot of services, software, and hardware catalysts to look forward to over the medium term with Apple. For that reason, I remain bullish on the stock, even as it continues following broader markets to multi-year lows.
Also worth noting, on TipRanks, AAPL stock receives a Smart Score rating of 9 out of 10, indicating that there is high potential for the stock to outperform the broader market.
Waiting on That Apple VR HeadsetAside from jaw-dropping "One More Thing" new product reveals, Apple's hardware and software innovations have been quite iterative in recent years. They haven't been able to garner as much excitement as the Apple of old.
Looking ahead, Apple's headset is something to get excited about. Still, global supply-chain issues could delay the launch date further. Many expect the VR/AR headset will be unveiled in early 2023.
Given that nothing official has been announced, and future COVID-19 supply disruptions could be in the cards, don't be so surprised to see the headset moved out to mid-to-late 2023. As challenges in the supply chain are ironed out, Apple is sure to polish its headset such that it stands out relative to the likes of what currently exists on the market today.
Beyond the headset, Apple Car rumors are still out there. Still, such a nascent product may be more than five years away.
In the meantime, Apple investors need other catalysts to get excited about. With the recent services unveiled, I think the company has a lot of new profit drivers that can keep earnings moving higher.
Apple Isn't Done Innovating in ServicesApple's Services push has been rewarded with a valuation multiple expansion over the years. As Apple pushes deeper into fintech while improving its footing in Enterprise Services, the company essentially has its foot in the door of new lucrative markets.
The company has its disruptor hat on and could evolve to become a leader in financial technology and pressure incumbent fintech firms well after this market sell-off concludes.
Further, the enterprise business may also give Apple's Services segment a nice jolt. As the company beckons in corporate customers with its M-series hardware and Apple Business Essentials IT service, the enterprise space appears to be a field ripe for disruption.
Given that the Mac is distancing itself from PCs with its incredible M-series chips and better integration with other hardware offerings, Apple seems to have set the stage to make a big move into the enterprise business. Indeed, Apple may be viewed as a consumer products company, but it's not afraid to explore new realms.
Wall Street's TakeTurning to Wall Street, AAPL stock comes in as a Strong Buy. Out of 27 analyst ratings, there are 21 Buy recommendations and six Hold recommendations.
The average Apple price target is $186.33, implying upside potential of 37.7%. Analyst price targets range from a low of $157.00 per share to a high of $210.00 per share.
The Bottom Line on AppleApple is the original disruptor and is not about to slow down, even as the economy does. If anything, Apple is setting itself up to take share as times get tough with software, hardware, and services innovations.
Sure, the market has soured on Apple recently, but with so many medium-term catalysts, it's hard to be a seller here.