Nasdaq Bear Market: Is Apple Stock a Buy Right Now?

Investors looking to buy blue-chip stocks with a strong growth profile can consider purchasing Apple shares right now.

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The last week saw all major indices lose significant momentum, as macroeconomic challenges continued to weigh heavily on investor sentiment. After accounting for recent losses, the S&P 500 index is down 23% from all-time highs. Comparatively, the Dow Jones index has slumped 19.6%, while the tech-heavy Nasdaq Composite index has declined by a massive 32% from record highs.

There is a good chance for the markets to slide further, especially if recession fears come true. But it would be unwise to attempt to time the dip.

Historically, around 50% of the S&P 500’s best days occurred amid a bear market in the last 20 years. Another 34% of the market’s best days took place in the first two months of a bull market, which is impossible to predict.

It’s better to stay invested rather than time the stock market. Given these factors, let’s see if you need to buy Apple (NASDAQ:AAPL) stock right now. A technology heavyweight and one of the largest companies in the world, shares of Apple are trading 17.4% from all-time highs right now, valuing the company at US$2.41 trillion by market cap.

The iPhone 14 will be a key revenue driver for AAPL stock

In the last few years, Apple has looked to diversify its revenue base, but the iPhone still accounts for a majority of the company’s total sales. Apple recently launched the iPhone 14 line-up, and demand for the smartphone remains solid.

The iPhone is the largest-selling smartphone in the United States. Further, there are over one billion active iPhones in use globally. According to Daniel Ives, a Wedbush analyst, the long shipping times for the iPhone 14 indicate strong demand.

Ives emphasized that 240 million iPhone users are yet to upgrade their devices in the last three-and-a-half years, leading to pent-up demand, despite an inflationary environment.

A well-diversified giant

In the last three quarters, the iPhone accounted for 54% of total Apple sales. But there are several other business segments that are fast gaining traction. For example, the MacBook has a 15% share in the personal computer market in the United States. Further, the iPad is the most popular tablet in the world with a share of 31%.

Recently launched devices such as the Apple Watch and the AirPod are also raking in billions of dollars for Apple each year.

Additionally, strong device sales should act as a long-term tailwind for Apple’s Services business that includes multiple subscription services such as Apple Arcade, Apple TV+, Apple Music, and Apple Care. In fact, the Services business is fast approaching US$100 billion in annual sales and is the company’s fastest-growing segment.

AAPL stock is a top long-term bet

In the first three quarters of fiscal 2022 (ending in September), Apple grew its sales by 8% year over year to US$304 billion, while adjusted earnings rose by 10% to US$4.86 per share. Its operating cash flow stood at US$98 billion, while free cash flow was over US$90 billion in this period, allowing the company to investors an annual dividend of US$0.92 per share, translating to a forward yield of 0.60%.

Apple began paying investors a dividend in 2012, and these payouts have surged 143% in the last 10 years. Yes, its forward yield is pretty low at 0.60%, but AAPL stock has returned over 600% in dividend-adjusted gains since September 2012. Its payout ratio is less than 15%, which suggests dividends should keep increasing in the future.

Apple’s stock price is also trading at a discount of 20% compared to consensus estimates.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Apple. The Motley Fool has a disclosure policy.

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