Since hitting a low of near $90 per share in May, Apple Inc. (NASDAQ:AAPL) shares have been marching higher, and could crack $120 in early trade on Jan. 12. While Facebook Inc (NASDAQ:FB) board member (and President Trump bestie) Peter Thiel claims “the age of Apple is over,” and the company is continuing to lose low-end business in China to local rivals, this Christmas may be its best ever.
It would have to be pretty spectacular to beat 2015’s $75.87 billion in sales and $18.31 billion, $3.28 per share, in net income.
The consensus among analysts is it will come close on both fronts, with revenues of $76.82 billion and net income of $3.22 per share of AAPL stock. Its cash hoard, $237 billion at the end of October, is continuing to grow and it will nearly top the entire GDP of Finland.
What investors should be asking, however, isn’t what Apple has done, but what it is going to do.
AAPL’s Future: Augmenting, Grounding Reality
Start with augmented reality, the technology you saw last year, in a primitive way, with the Pokemon Go phenomenon.
At CES, the German Carl Zeiss Meditec NPV (OTCMKTS:CZMWF), which has a pair of Virtual Reality goggles in the market, had a booth in the augmented reality area but no product to show. Although it is still a rumor, Robert Scoble discovered solid evidence that the company is working with Apple on “mixed reality” glasses that could debut next year.
Augmented reality, as opposed to virtual reality, superimposes computer data on an existing world view. In the workplace, it can give repairmen instructions as they work. In addition to superimposing games on your worldview, it can also deliver marketing messages as you walk, or interface with your smartphone so you can see your directions as you drive, and don’t forget what is on your to-do list.
Such a heads-up display from Apple would be a real breakthrough, transforming the way people work with technology from looking down at screens to looking up and saying what they want.
The breakthrough would lie in creating an interface that is not distracting to either the wearer or the people around them, as the “Google glass” effort from Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) proved to be.
That’s not all. AAPL has also patented an armband that could deliver a host of health indicators, not just blood pressure and heart rate, to the wearer and their doctor. Wearables are currently stuck as fashion devices because they lack the precision and utility needed for Food and Drug Administration approval, but breaking through that wall would open a multi trillion-dollar market.
Apple Is Taking the High End
While most analysts focus on absolute market share, investors know that the key to a mass technology market lies in who has the high end, where the biggest profits lie. I was shocked over the holidays to find I am now the only member of my family still carrying an Android phone. All my relatives now have iPhones.
This not only gives Apple 90% of the market’s profits, but allows it to extend the ecosystem back to the PC, where it is now the fourth-largest player in a stabilizing market and, on a per-unit basis, the most profitable.
While Android developers struggle to get free apps onto phones, AAPL’s iOS will pass $1 trillion in revenue sometime this year, delivering $20 billion per year to developers and justifying its spending billions of dollars to build-out a network of cloud data centers.
Slice Intelligence estimates that Apple even had one-quarter of the wireless headphone market this Christmas with those Airpod units that analysts laughed at a few months ago. That’s nearly as much as much as Beats and Bose combined.
So Much Winning for AAPL Stock
The bottom line is that Apple is still winning.
The iPad people thought was dead? It had a spectacular Christmas. The Apple Watch you thought was dead? It sold out. AAPL doubled-up on device activations compared with Samsung Electronics (OTCMKTS:SSNLF).
The earnings multiple for Apple, based on what most people considered a bad year, is 14.5. That’s cheap. That’s why AAPL stock is not one you trade, but one you own.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL, FB and GOOGL.
