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Apple's Healthcare Ambitions Just Took A Leap Forward: Time To Buy?
Apple (NASDAQ: AAPL) has received a barrage of bad news since the start of the year. The company's iPhone sales in China -- one of its most important international markets -- have been struggling, its overall financial results haven't been great, and it's being sued by the U.S. Department of Justice (DOJ) for alleged monopolistic practices.
However, the tech giant recently received some good news on the healthcare front. Those developments again highlight Apple's potential in a growing business segment.
A vote of confidence from regulators
Apple has incorporated many health-centered functions into its Apple Watch, including a history of atrial fibrillation (irregular heart rhythm). Designed for people 22 and over, this nifty software tool tracks users' heartbeats. The Apple Watch doesn't diagnose single episodes of atrial fibrillation. Rather, users can check the history feature for an estimate of time spent in atrial fibrillation over the previous week.
Recently, the U.S. Food and Drug Administration (FDA) announced that this feature could be used in clinical studies to evaluate atrial fibrillation burdens. This is part of the agency's Medical Device Development Tools (MDDT) program, which was created to help speed up and facilitate the development of innovative medical devices.
One of the advantages of the Apple Watch is that it provides a non-invasive way to estimate atrial fibrillation burdens, thereby making it easier for medical device developers to collect necessary data in clinical trials. According to the FDA, Apple's atrial fibrillation history feature became the first digital health product to be deemed eligible under the agency's MDDT program.
Here's the bigger picture
That's all well and good, but why should investors care? This recent news won't improve Apple's financial situation, nor help with issues such as iPhone sales in China or the DOJ's antitrust lawsuit.
Still, the positive regulatory development shows the potential of Apple's ambition in the healthcare field. Last year, some reports suggested that the tech giant has made progress toward its goal of adding a non-invasive glucose monitor to the Apple Watch. No doubt, the company will keep innovating and adding new health-related features. Helping people keep track of a range of health measures is a great selling point.
Beyond Apple's narrow healthcare ambitions, the company continues to make headway in ramping up its services segment, and that's the most important point. iPhone sales aren't the growth driver they used to be. In Apple's latest reported period -- the second quarter of its fiscal 2024, ended March 30 -- revenue declined by 4% year over year to $90.8 billion. iPhone sales declined by 10.5% to about $46 billion.
The fact that Apple can generate $46 billion worth of sales for a product no one truly needs in a somewhat precarious economic environment is impressive, but that's not enough, not unless revenue from the company's most important franchise is moving in the right direction. However, the bright spot in the period was that Apple's services unit generated sales of $23.9 billion -- the highest ever for a single quarter, and an increase of 14% from the comparable period of the previous fiscal year.
For investors, here's the takeaway: Apple's future is in services, especially as the segment boasts much juicier margins, and the company knows that. Is it enough to make the stock a buy? In my view, the answer is yes. If you're in it for the long haul, you still have good reasons to invest in Apple, especially as it's rumored to be planning a big move in the lucrative field of artificial intelligence (AI).
Apple's vast ecosystem of over 2 billion devices, and its incredible innovative abilities, should eventually allow it to turn things around. Don't give up on this top tech stock just yet.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
