Investors should hop on Apple bandwagon
Tech giant poised to be first US$1T market cap firm
If you’re not interested in paying US$999 or more for the new iPhone X, there is a much better use for your hard-earned cash: buy Apple Inc. shares.
The stock has been on an absolute tear, rising nearly 40 per cent this year alone. Much of those gains were in anticipation of new product launches, so with the share price down or flat since Tuesday’s unveiling, the market is sending a message. It wants to see results before giving Apple any more credit.
That offers investors an opportunity that won’t be around for long, partly because Apple shares typically lose momentum around major product events, then move up into earnings season. But the opportunity also lies in the fact that a high price tag for the latest smartphone won’t deter everyone, since it includes exactly the features everyone was waiting for.
The iPhone X boasts an edge-to-edge 5.8 inch Super Retina OLED display, an upgraded processor, wireless/inductive charging capability, Face ID, a longer battery life and augmented reality-enabled dual-lens camera.
It will be the device to have for the next year or so, whether you’re a photography lover, technophile, or simply want to impress your friends and co-workers. So count on supply of the new smartphone to be constrained — at least at first.
For those looking at cheaper options, Apple didn’t let you down, as it is offering more typical upgrades via the iPhone 8 and iPhone 8+.
A new cellular-enabled Apple Watch Series 3, as well as Apple TV 4K, will ensure the company becomes a bigger part of your life and wallet. These products should be good sellers during the holiday season, as Apple continues to enhance the ecosystem experience.
Since the iPhone X won’t begin shipping until Nov. 3, the later-than-anticipated launch date could shift some sales from the first quarter of fiscal 2018 (ending in December) to Q2. But regardless of the timing, we’re at the start of one of the strongest iPhone cycles in recent years.
The iPhone 7+ didn’t achieve supply-demand balance until about four months after launch, so expect much the same for the iPhone X. That means Q2 (ending in March 2018) may end up being a big one for Apple and its shareholders.
Apple’s iPhone installed base is set to surpass 635 million by the end of 2017, which will not only drive strong smartphone replacement sales, but thanks to its improved product lineup, will also propel the high-margin services revenue growth that has rightly become a focal point.
Since Apple is trading at a valuation similar to legacy pipeline computer companies, investors are undervaluing the potential of its various platforms. That’s particularly true given that the iPhone installed base continues to grow in double-digits, and boast high retention rates.
While glossy products and impressive videos get consumers excited for good reason, what Tuesday’s product and services lineup demonstrates is that Apple knows what it’s doing. It’s been able to achieve the right balance between higher prices and improved offerings to keep customers coming back. That’s what has made it the preeminent smartphone brand on the planet, and that’s what will make it the first US$1 trillion market cap company.
That milestone will probably come sooner rather than later. It might take a surprising contentrelated acquisition — or more likely, impressive iPhone 8 or iPhone X sales numbers — to get there, but it will happen.
Even if you’re not the biggest believer in Apple products, you should be a buyer of the stock.