Apple (NASDAQ:AAPL) investors have had a lot to celebrate in 2019. Despite a continued slide in iPhone revenue, Apple stock just keeps climbing. In a year where iPhone revenue is down 13.6%, AAPL stock has increased in value by nearly 72%. Services like Apple Music, Apple TV+ and Apple Arcade get some of the credit.
There is also anticipation that the arrival of 5G support in next year’s iPhones will lead to a big upgrade cycle in 2020, along with at least a temporary resurgence in iPhone’s slumping revenue. Increasingly, though, it’s wearables that are helping to power that Apple stock price. Some analysts are betting it will be a $100 billion business for the company within a decade.
Apple Revenue (and AAPL Stock) Powers On, Despite the iPhone Sales Slump
The massive growth in Apple stock value is tied directly to the iPhone. Just look at pre-iPhone revenue to see the effect.
Before the smartphone’s launch in 2007, Macs and iPods were AAPL’s primary sources of revenue. In fourth-quarter 2006, the Mac division brought $1.87 billion, with the iPod generating $1.50 billion. Total revenue was $4.37 billion. It’s estimated that Apple has sold over two billion iPhones since then.
In Q4 2019, despite a continued slump, the iPhone generated $33.36 billion in sales. Macs generated $6.99 billion. Total revenue for the quarter was $64.04 billion, a new record for the company. While record-setting quarterly Services revenue of $12.51 billion is a big part of the story, so are the sales of wearables.
Apple’s Wearables, Home and Accessories division posted $6.52 billion in revenue — surpassing iPad sales and nearly at Mac levels. More importantly, revenue for that Wearables division was up a whopping 54% compared to the previous year.
Apple’s Wearables Sales Skyrocketing
IDC just released Q3 numbers for the global wearables market and they show just how dominant Apple has become in a very hot market. Worldwide, sales of the devices surged 93% in the quarter as consumers snapped up smartwatches, fitness trackers and wireless earbuds.
AAPL seriously outperformed the pack. Sales of the Apple Watch, AirPods and Beats headphones nearly tripled year-over-year. The 29.5 million units Apple shipped (compared to 10 million in Q3 2018) captured 35% of the market.
Being the dominant player in a rapidly growing market segment — and charging premium prices — is a very nice position to be in. There is competition, but it’s no contest at this point.
China’s Xiaomi is in second place (with a 14.6% market share) primarily because of its cheap Mi bands, while Samsung (9.8%) continues to offer smart watches and wireless earbuds. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google is in the process of acquiring Fitbit (NYSE:FIT) in an attempt to finally challenge the Apple Watch. But none of the competition comes close to Apple’s level of sales.
Marching Toward $100 Billion?
Loup Venture analysts Gene Munster told Fortune that he sees Apple’s revenue from wearables growing at a 20% clip for the next five years, making it worth $75 billion in annual revenue by 2025.
He’s not alone in his bullish outlook. An analyst for Strategy Analytics told Fortune that with products such as AR glasses expected to be in the pipeline, wearables could be a $100 billion business for Apple by 2030.
Bottom Line for Apple Stock
Wearables like the Apple Watch and AirPods are on track toward being a massive business for Apple. But the beauty in these devices is that they also help to drive consumers toward laying down the cash for more expensive hardware like an iPhone and to subscribe to Apple services.
As it approaches $271, Apple stock continues to climb. It’s more valuable now than the heady days when every iPhone launch weekend set new records, and has more than recovered from last year’s iPhone panic-induced slump.
With a holiday season of wearables like the Apple Watch and AirPods among this year’s most popular gifts, AAPL’s next quarter is going to see another big win for the Wearables division. And you can expect wearables to be an increasingly important part of Apple stock price growth over the next decade.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.