Prior to the Apple Inc. (AAPL) launch of the iPhone 6s and iPhone 6s Plus, many top analysts expected a year-over-year loss compared to the 6 and 6 Plus launch weekend. That was not the case. Apple iPhone sales surpassed all expectations with sales of 13 million, a 30% increase from last year.
Considering such big numbers, it would appear that AAPL has limited upside growth for the iPhone from here on out. But when you look down the pipeline, the list of true competitors is downsizing by the month, and Apple’s continued reign of dominance looks all but assured.
Ultimately, this bodes well for Apple stock.
Who Can Stop AAPL?
For AAPL to fall from the top of the smartphone market, and Apple stock to follow, something must emerge to take its place, or at least pose a threat as a legitimate competitor.
In the past, two companies have been the primary cause of headaches for AAPL: Samsung (SSNLF) and Xiaomi. However, both companies have struggled as of late, particularly since AAPL launched larger-screen phones.
Xiaomi is largely considered the Chinese copycat of Apple, selling iPhone lookalike phones with Android operating systems. Back in the second quarter of last year, Xiaomi’s smartphone shipments rose 240% to 15 million, which temporarily made it the top smartphone vendor in China.
However, since AAPL launched the iPhone 6 and 6 Plus, Xiaomi’s fortune has changed. Its growth slowed to just 33% in the first half of this year, and Quartz recently noted that the second quarter showed a slight sequential decline to the first quarter.
So it appears that Xiaomi’s run has at least slowed, if not stopped.
Samsung’s smartphone shipments are expected to total 323.5 million this year. While very impressive on an absolute basis, it represents a 1% loss year-over-year, representing Samsung’s first ever annual decline in smartphone sales.
Therefore, it is safe to say that neither Xiaomi nor Samsung are growing like they once were, if growing at all. Meanwhile, BlackBerry (BBRY) is no longer relevant and Microsoft (MSFT) just took a $7.6 billion write-off related to the handset business it acquired from Nokia (NOK).
As a result, there’s really nothing standing in Apple’s way. It is the only company that continues to produce smartphone sales growth, and barring something unseen, things should stay that way.
What About Apple Stock?
This year, AAPL is expected to ship 223.7 million smartphones, good for growth of 16% year-over-year. That in turn will help drive Apple’s revenue growth, as each new iPhone typically drives the average selling price of Apple’s iPhone category higher too. With about three-quarters of Apple’s profit coming from iPhones, this higher selling price and continued growth bodes well for profits too.
Overall, AAPL’s sales growth was expected to rise 27.6% for the 12 months ended Sept. 30, and just 5.2% next year. Based on the struggles of AAPL’s primary competitors combined with the incredible opening weekend of iPhone 6s and 6s Plus sales, there’s a good chance that these expectations are far off.
With Apple stock trading at just 7.75 times next year’s earnings minus cash, there could not be a better time to buy. After all, there doesn’t seem to be a legitimate competitive threat in the foreseeable future. Thus, AAPL’s reign of dominance will continue, and Apple stock will follow higher.
As of this writing, Brian Nichols did not hold a position in any of the aforementioned securities.
