Apple (NASDAQ:AAPL) has hit a $1 trillion market cap and followed up by revealing three new iPhones last week. So is it finally time for Apple stock to slow down? Or is there more growth ahead?
In recent years, there seemed to be a shift in cell phone etiquette; people began to realize they were perhaps a bit addicted to their iPhones. So when I was out to dinner with friends, for example, my companions would make it a point to not take their phones out, or to apologize if they did.
In recent months, though, I’ve noticed a different trend: phones aren’t out, but mid-conversation, wrists will buzz and the person I’m with will momentarily be distracted by a smartwatch notification before apologizing. “Sorry,” he or she says, looking down at the tiny screen. “My sister sent me a text.”
For Apple, the idea that a smartphone could evolve from ubiquitous technology to the foundation of popular new technologies is, well, pretty much what we’ve come to expect from the company. Apple stock’s growth has become routine — and that’s great news for Wall Street.
With the Unveiling of New iPhones, Apple Stock’s Growth Shows No Signs of Slowing
Apple’s event earlier this month debuted the new iPhone but also heavily emphasized the Apple Watch Series 4. Apple framed the smartwatch as a health-conscious wearable especially suiting for the aging customer. Lure in new customers who want to track their vitals by wrist, and you’re luring in new iPhone customers too.
Apple has been using its smartphone dominance to add other revenue streams as well, whether that means backing financial transactions or selling cloud storage space and fancy headphones. And with those revenue streams well-established and growing, it’s now slowly upping the price of its phones — because consumers appear willing to pay for more.
In the most recent quarter, Services sales grew 31% (iTunes store, app stores, Apple Music) while Other Products grew 37% (AirPods, Beats, Apple TV, Apple Watch, and more) — the two fastest product segments. According to the company, Apple Pay completed more transactions than Square (NYSE:SQ) and more mobile transactions than PayPal (NASDAQ:PYPL) that quarter as well.
On top of that, Apple also unveiled new top-tier iPhone models at the aforementioned event: the iPhone XL and iPhone XS. The iPhone XS Max starts in the quadruple digits and could cost as much as $1,449. With the average price of the iPhone marching steadily higher, it seems safe to predict sales will continue to do the same. (Last quarter, phone sales grew 20% year-over-year).
Indeed, Apple stock is slated — despite its whopping $1 trillion market cap — to grow earnings by 13% each year looking forward. This year, the top-line growth looks especially impressive at 15%. The company’s 1.3% dividend yield is just the cherry on top.
The Bottom Line for Apple Stock
Add it up, and AAPL’s dominance is pretty hard to argue. But more importantly, the company is using it well: ramping up its new revenue stream while trying to squeeze more coin out of customers for its core offering.
I’ve been bullish on Apple stock for some time and the company’s most recent event and most recent earnings report suggest to me that things right on track. If anything, Apple’s growth story is so predictable as to be boring. But boring isn’t always a bad thing — especially if it means more money in the bank.
As of this writing, Robert Martin was long AAPL.