Long-term investors are accustomed to stellar returns from Apple (NASDAQ:AAPL), and while that scenario may not repeat this year, the iPhone maker has plenty of avenues with which to stir more upside in the years ahead.
Even with that, the shares are handily outperforming the broader market on a year-to-date basis and are up 25% off the July lows.
That could highlight the potency of Apple-heavy exchange traded funds, including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Count Credit Suisse analyst Shannon Cross among those who are bullish on Apple. On Tuesday, she lifted the firm’s rating on the stock to outperform from neutral while boosting the price target to $201 from $166.
Part of the reason she’s constructive on Apple is the company’s user base. While that’s largely driven by the iPhone, it powers other revenue-generating opportunities, too.
“In our view, Apple’s installed base of >1.8B devices: (1) accelerates market adoption of the company’s services and software offerings and (2) creates stickier customer relationships with higher wallet share, which fortifies the company’s ecosystem,” Cross wrote in a report to clients.
It’s not hard to find Apple bulls. That’s been the path of least resistance with the stock for years now. However, widespread positivity regarding Apple stock doesn’t diminish the allure of ETFs such as QQQ and QQQM. It enhances those funds’ propositions because both allocate 13.42% of their weights to the stock, as of Aug. 14, according to issuer data.
Supporting the case for QQQ and QQQM as ETF proxies on Apple stock is the point that the company has avenues for bolstering margins.
“We estimate gross margin will continue to trend around 43%, with inflation and currency headwinds offset by higher Services revenue (growing double digits) and vertical integration of components. Net of macro challenges, we expect gross margin to continue to trend up,” added Cross.
Apple also has a major asset by way of a revered management team led by CEO Tim Cook. And yes, that’s a pivotal factor in the long-term thesis for the stock.
“[Apple] management focuses on high customer satisfaction by improving ease of use, product quality and continuity between devices,” Cross said. “[This results in] high product value and repeat customer engagement.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
