The rise of the dollar and the decline in consumer demand erode the strengths of its valuation
Apple also has its problems. Its steady growth and cash-back policy, illustrated in Thursday’s results, are much more attractive than those of spendthrift cyclical peers like Meta. But the rising dollar and falling consumer demand are eroding the valuation’s strengths.
The quarter ended September 24 was typical of Apple in many ways. The services business continued to rise, with 5% more revenue than in the same period of 2021, as Apple learns to squeeze more out of customers through the sale of advertising, financial services and apps. iPhone sales grew 10%, and Apple’s share of the smartphone pie rose, with 18% of the market in the third quarter, up from 15% a year ago, according to Canalys.
More importantly, he showed restrained ambition and his continued willingness to return excess cash to shareholders. Operating expenses rose 16%, and it paid out nearly $30 billion through dividends and share buybacks. Although it continues to play with technology for cars and virtual reality, the R&D budget is relatively spare: less than 8% of the growing revenue.
The combination looks favorable compared to Meta, which increased capex again while its margins shrink. And that advantage is being reflected in the action. Apple is down just 3% in the past year, while Meta’s have plunged nearly 60%.
But the incredible strength of the dollar is a strong headwind, making Apple’s gadgets and services less affordable abroad, and more than half of its revenue comes from outside the US. Consumer demand seems reeling in the face of Christmas. In addition, the solidity of its stock has caused its valuation to be stretched to 23 times profits, 35% more than the average of the last decade. Apple’s relative attractiveness isn’t very comfortable in today’s environment.
