Apple’s Global Smartphone Market Share Increases by 20%, Should You Consider The Stock?

Apple NASDAQ: AAPL is a technology company based out of Cupertino, California. It produces a range of hardware and software products, including the iPhone, etc. Apple’s stock has corrected over 20% from its 52-week high and now trades at a much cheaper valuation than in the recent past. 

Apple has been witnessing a steady decline in market share for the iPhone in the U.S. market, where market share fell from 65% in 2020 to 50% in Q1 2022, but on the other hand, has witnessed significant gains in the international market. According to Omidia Apple’s smartphone market share surged to 18.3% globally shipping a total of 56 million units. In 2019 Apple has a market share of 13%, in 2020 it had a market share of 14% and in 2021 it had a market share of 15.6%.

Apple has been consistently gaining market share through this period and despite a slump in sales in 2021, it managed to continue to increase market share.  Meanwhile, its primary competitor Samsung remains at the top of its global smartphone market share

The global smartphone market has been slow in 2022 sales declined by 12% in the first quarter of 2022 to 308 million units.  The decline in smartphone sales stems from two big factors, firstly, the supply-chain issues affecting the market, but the bigger issue stems from demand, as both the Chinese lockdown and global economic headwinds have weighed on smartphone demand. According to IDC, the global smartphone market is expected to decline by 3.5% in 2022, which is likely to affect Apple's revenue negatively.

Global Smartphone Outlook and Apple’s Market Share

The global smartphone market was valued at $480-500 billion in 2021. And is expected to grow anywhere from 5-7% until 2030, and is projected to grow to around $800-950 billion in 2030. Apple’s market share may continue to increase, as global purchasing power and iPhone prices moderate. But competition will continue to increase as smartphone makers improve their own products, closing the gap between themselves and the iPhone.

Can the iPhone continue to increase market share?

The iPhone competes primarily on chip and camera technology. Apple expects both of these technologies to improve with the upcoming iPhones, which will help retain customers. Considering that Apple has brand loyalty and an aspirational component that makes it sticky, it could see its market share increase to 20% in 2023. Assuming the market share remains consistent, iPhone sales could reach a total value of $450-500 billion by 2030. In 2022, despite a slight decline in global smartphone shipments, iPhone sales are likely to bring $200 billion in revenue.

Valuation outlook for Apple in 2022

Apple’s total revenue for 2022 is expected to be around $400-410 billion and its net profit margin is expected to come in around 26%, with net profit at around $105 billion. That would put forward P/E (price-to-earnings), at around 22x. Considering discount rates are expected to rise, Apple might be slightly more expensive. But if Apple continues to pick up market share, the forward P/E could fall to as low as 19x.  Return on investment remains strong at 50%, and return on equity is currently at 150%. Cash on hand was $51 billion. The balance sheet remains robust and debt remains reasonable, making the company a safe stock to invest in.

Risk to Apple’s Stock

Apple remains a premium product and has been increasingly relying on less wealthy customers for incremental growth. These consumers may not be willing to continue to buy the iPhone if the price of the phones increases, or in general purchasing power falls. Furthermore, many global economies are facing economic turmoil, and China has remained resolute in maintaining its lockdowns.
Since China has been a significant source of growth for Apple in recent times, and with lockdowns likely to affect sales, revenue may slow down for the year. iPhones are not the only Apple products that are being affected. Computer systems are also facing a downturn, with sales down 12% y-o-y.  Therefore risks remain, and Apple’s stock could be a good bet for those looking to invest over a longer period.