It’s often said that stocks don’t move up in a straight line, but when it comes to Apple (NASDAQ:AAPL), it feels like the shares have done nothing but go up over the past year. During that span, Apple stock has nearly doubled, turning what was once merely a $700 billion company into one with a $1.42 billion market capitalization as of Feb. 10.
For fans of such anecdotes, a $100 investment in Apple in 2010 was worth more than $1,100 at the end of 2019. That’s obviously a stellar return, but it should not imply that Apple is done delivering for investors.
Yes, there will be bumps along the way and asking Apple to be worth $2.8 trillion at this time next year is asking a lot, but betting against Tim Cook and team is a risky proposition at best.
Over the near-term, the new coronavirus from China is an issue Apple investors need to account for. China-based Foxconn is Apple’s marquee components supplier and the fatal virus has prompted Beijing to shutter Foxconn factories. Currently, there’s more conjecture than clarity about when those plants will be up and running again, but what is clear is that if iPhone 11 is strong (it appears to be) Apple will have trouble meeting that demand with Foxconn factories down.
Evercore ISI analyst Amit Daryanani recently said that 381 of Apple’s 775 sourcing plants are located in China. That’s a challenge for the iPhone maker at a time when the “Wuhan virus” is getting worse, not better.
Still, there’s a lot to like with Apple stock, including some of the following reasons.
Wearables Dominance
Apple is both a hardware and software company, but it’s mostly associated with being the maker of the iPhone and iPad and, more recently, a competitor in the streaming entertainment battle.
However, investors should consider the impact of the booming wearables market – Apple Watch, AirPods Pro, etc., on returns. Wearables presents a major opportunity set for the right companies.
Interestingly, Apple’s ascent to wearables dominance has caught some market observers off guard due in part to “the false media narrative spun by market research groups that repeatedly focused on Apple’s hardware unit shipments rather than the audience of loyal buyers Apple was attracting within its castle moat,” reports Apple Insider.
Last year, Apple Watch accounted for $13.8 billion in revenue. Want a more fun fact to throw around with your investing friends? Analysts estimate AirPods Pro accounted for $4 billion to $5 billion in sales for Apple. Let’s call it $4 billion and even there, that’s quadruple ALL of Twitter’s (NYSE:TWTR) 2019 revenue.
Bottom Line on Apple Stock
If Apple’s innovation and execution don’t wow an investor, perhaps the company’s commitment to returning capital to shareholders will. The company was derided for upping its buybacks when the stock was trading around $250. Now, that seems like a brilliant move with Apple stock closing at $321.55 on Feb. 10.
Over the past seven years, Apple has bought back $390 billion of its own stocks, a figure exceeding the market values of all but 10 S&P 500 companies.
Based on that number and Monday’s closing market value, Apple’s buybacks equal almost two Boeing’s (NYSE:BA).
As of this writing, Todd Shriber did not own any of the aforementioned securities.
