5 Reasons Apple Will Continue its Growth
Apple Inc. (APPL) has had tremendous growth over the past 12 years. The iPhone revolutionized the way humans communicate with each other in 2007, the iPad reinvented where and how we work, and Apple TV+ plans to create a new way in which we consume content. All of these revolutionary products and services have returned vast amounts of cash to investors and they show no signs of slowing down. We'll cover some of the reasons we think Apple can continue to grow, and some things to watch out for.
1. Strong Leadership
There’s no debate that Tim Cook is no Steve Jobs, however, Tim has done a great job in returning value to its shareholders. Since August of 2011 when Cook took to the helm, Apple has increased its value tremendously.
When Cook initially took over, the stock price was around $56 per share. Today, as of October 31, 2019, it’s the price is hovering around almost $250 per share. That’s a 346% increase in value in just 8 years that leaves investors salivating!
When you compare that to the S&P 500 which increased 156% in those 8 years, Apple beat out the market by 121%. No matter your stance on Tim Cook and co, you can’t argue those numbers.
2. Overseas Growth
America has been the focus of Apple products for some time now. American consumers have the cash to purchase Apple products and the resources required to operate them. That’s shifting, however. Now, countries like China are starting to provide growth for Apple as prices lower and these countries gain internet capabilities. Look for Apple to continue to push its overseas efforts.
3. New Products and Services
As Apple continues to churn out new products and services, you can expect its revenue and profits to grow. Apple has shown strong investments in Apple TV+ and it’s Apple Arcade betting on its long term revenue.
Every year, Apple releases a new version of its top-selling product, the iPhone. And every year, the price seems to increase. While this might be annoying to the consumer, this is usually a good sign for investors (until consumers are no longer willing to pay the price). Wearables like the Apple Watch are growing rapidly, helping to add to their cash pile.
As Apple continues to grow, new products will be at the forefront of their efforts. Products such as the newly launched AirPods Pro offer Apple the ability to revive a market that was saturated and we look for that to continue.
With Apple TV+ debuting tomorrow, Apple is continuing to expand its’ service business. And it’s a bet that seems to be working. People are continuing to pay for various services like Apple Music and the iPhone Upgrade Program, and with the addition of Apple TV+ and Apple Arcade, you can anticipate Apple’s service revenue to continue its rapid growth.
4. More Subscriptions
Investors have been pressuring Apple executives about a subscription-based iPhone purchase program and Cook recently made statements that could foreshadow its entrance. On Apple’s most recent earnings call, Cook stated, ”We are cognizant that there are lots of users out there that want sort of a recurring payment like that and the receipt of new products on some sort of standard kind of basis and we are committed to making that easier to do than perhaps it is today.”
5. Growing Ecosystem
One of the most impressive things Apple has been able to do is create an ecosystem that works flawlessly across all devices. This makes it that much easier for current customers to expand their product lineup which in turn boosts Apple’s revenue. As their product lineup expands, look for Apple to keep heavily integrating devices and cross-promoting products.
What to Watch Out For
We gave you 5 reasons we think Apple will continue to grow, but we’ll also play devil's advocate and give you some reasons it won’t.
Lack of Innovation
Critics of Apple will say that their innovation has been lacking since the departure of Steve Jobs. And they’re not entirely wrong. iPhone sales have been decreasing and new product offerings seem less advanced than previous generations. But is it a problem with innovation, or is it an issue with technology as a whole? Have we come so far that new advancements are becoming harder and harder to come by? That answer is up to you. After all, you can only fit so much into a device a few millimeters thick and a few inches tall.
There’s no doubt that trade tensions between the United States and China have been affecting businesses worldwide, and Apple is certainly in the crossfires. As we look to 2020 and beyond, trade tensions could be a major factor in Apple’s growth.
With new products introduced every year, there is a risk of fatigue in customers. Some customers could get tired of having to upgrade their devices often and will resist the change.
Apple has been one of the best stocks over the past 15 years in returning value to its shareholders and it shows no signs of slowing down. With new products and services arising as technology changes, we expect Apple to remain a market leader in the technology space. Their strong leadership and innovative products can catapult their revenues to the next level, returning even more value to shareholders.