• Concern over disruption to supply chains
  • Demand for expensive consumer electronics could suffer in a recession
  • The iPhone may have reached saturation point

Electronics firm Apple (AAPL:NASDAQ) is one of the great success stories of the last quarter-century, having developed its own complex ‘eco-system’ with more than 900 million customers owning its devices.

It has a high customer retention rate, and while demand in the US and Europe may be close to peaking there is still a huge addressable market in countries like China and India.

In China, Apple sold 333 million iPhones in 2021, whereas in India, a nation of 1.2 billion people, it sold less than five million units.

Supply disruptions could negatively impact iPhone sales for the next two quarters but the firm is pushing to produce its own chips within a few years, as it has for its Mac computers, and its own screens.

The iPhone still accounts for more than half of Apple’s revenues, which topped $394 billion last year, and as a premium product there may be doubts over whether cash-strapped consumers will fork out for something which is nice-to-have rather than must-have.

After losing nearly $850 billion in market value last year, Apple shares now trade on 21 times forecast earnings for the current financial year compared with 48 times 2020 earnings.

Revenue growth from services such as Apple TV, iTunes, the App Store and Apple Pay is running at more than 50%, with a gross margin of around 70% or double that of product sales.

By the end of September 2023, the company’s net cash pile is forecast to be $47.89 billion, supporting dividends and share buybacks which together amounted to more than $100 billion last year. A 654% total return in Apple shares on a 10-year view, ahead of a still impressive 287% increase in earnings per share over the same time period, shows how the company’s qualities have become more highly prized by the market.

On balance, the shares are worth buying at the current price.