Apple (AAPL) announced after the bell on Tuesday and beat analysts’ estimates on all counts.
Sales of all its major products – iPads, Macs and iPhones – came in with solid year-over-year gains. The Apple Watch, the Beats line and Apple TV are all lumped into one category, so it’s hard to tell how sales on the watch are doing, but that division also posted strong numbers.
The biggest challenges for AAPL moving forward are going to be showing that iPhones aren’t going to be its only major product. The iPhone accounted for 63% of the company’s revenue in the quarter.
As the mobile phone sector begins to mature, AAPL needs to grow market share by taking if from Android devices if it’s going to continue to grow at the current pace. In the current quarter AAPL said there was a 30% conversion from Android devices to iPhones — a new record.
Sales in the segment that includes the watch, Apple TV and Beats grew 61%, so this is a good sign that AAPL is developing the arrows in its quiver.
Looking Ahead for AAPL Stock
Christmas sales will be the determining factor if AAPL can pivot from iPhones and use its other products to help keep its revenue base expanding at the kind of numbers we’re seeing now. The coming quarter should also give us a sense of how popular the Watch is and how well the Beats franchise is retaining customers.
Revenue this quarter rose 22% over the year-ago quarter and its gross margins continued to expand.
And the launch of the iPhone 7 and 7 Plus (in September 2016) will be a big driver in growth since it’s expected to deliver a number of new modifications. Also, the coming quarters will show us whether Apple’s new payment plan can expand the market for its phones. Basically it’s a financing plan, so it should make the iPhone more accessible to aspiring Apple consumers who were priced out of the market previously.
Also, AAPL is expecting more iPhone users to transition from the standard model to the Plus-size phones in coming quarters. About 66% of current users have yet to transition to larger phones.
China remains key to AAPL’s future success. Sales in Greater China (including Hong Kong and Taiwan) grew 99% and smartphone sales there grew 87%.
AAPL’s cash holdings have grown to $206 billion. That’s a sizable war chest to move into the automotive market or buy companies that have technologies that can complement its growing base of products.
AAPL also bought back $14 billion in shares in the last quarter, a new record for the company.
AAPL looks like it has gotten through a tough year well. Up slightly more than 6% year to date, there’s some value accumulating in this unrelenting growth leader.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
