You’re probably familiar with the old saying about whether the glass is half full or half empty.
It certainly applies with Apple (AAPL) iPhone 6s sales.
Yes, the company sold a record 13 million units during its launch weekend. That was up 30% from the iPhone 6 launch last year.
But these new sales figures included sales in China, which weren’t included last year. That meant, all things equal, iPhone 6s sales were only up 5%.
And AAPL presold the new model for a week longer than it did the previous model.
Then again, margins look better — at least initially — on the 6s than the 6. And the new installment billing will open up a much bigger market, as well as help increase the velocity of upgrades.
The other side of the coin is the fact that AAPL is relying more heavily on its phone sales every quarter … and phone sales for the company are slowing. Unit sales growth has fallen from 80% in 2011, to 13% in 2014. In the second quarter, Huawei and Xiaomi actually outsold AAPL in China for the first time. These are signs of a maturing market.
Now, none of this signifies the clouds of doom gathering. It’s simply time to look to see how AAPL will pivot.
Growth Areas for AAPL
And this is where AAPL has to look to some of its new projects to add to its growth. One thing about the company’s massive $200 billion cash hoard– it’s kept offshore. If it’s ‘repatriated’ by using it to boost dividends or pay for stock buybacks, it will be taxed.
That gives AAPL further motivation to grow its business by acquisition and develop new markets. And in the past week it has done just that, purchasing two artificial intelligence companies, Perceptio and VocalIQ. AI is crucial in developing autonomous cars as well as next-generation cars and devices’ voice- and movement-recognition systems.
Both these acquisitions fit into the theory that AAPL is building up its divisions to launch a car by 2019. This would certainly be a very good place to commit large sums of cash, since it takes more than just building a few cars to make it work, particularly when it is a company known for its lush user experience.
The building, testing and support infrastructures would have to be enormous. The expectations would be entirely different than they were for Tesla (TSLA), or even a traditional carmaker like Ford (F).
But if any company can pull it off, it’s AAPL. And with its war chest, it would have all it needs to succeed.
AAPL also has looked to reinvigorate its other divisions. There’s renewed focus on its iPad revamp, and AppleTV has been making inroads with the entertainment content community. Apple Music is still building out, and the Apple Watch is growing its market share.
The question at this point isn’t if AAPL can grow beyond the iPhone, it’s how it will do it.
Bottom Line
Since the beginning, AAPL has always pioneered new tech in its core space, and there’s no doubt it will do so again. It has solid management, a great store of operating capital and very solid businesses.
It’s always exciting to see what AAPL will come up with next — a revolutionary electric car? A new way to merge television and our increasingly online lives? Something entirely new?
There will always be AAPL naysayers, and that’s actually a good thing. Critics bring up excellent points, but ultimately what’s important is how a company responds to those critiques.
And at this point, AAPL is a dominant tech firm with very solid growth characteristics.
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.
