Why Apple Inc.'s iPhone Sales Will Continue to Grow

Apple (NASDAQ: AAPL  ) is conservatively valued, with a price-to-earnings ratio of just 13. Even more, it could be argued that the market has priced the company for zero net income growth going forward. But does a valuation this conservative make sense in light of continued opportunity for Apple's largest and most profitable business segment?

Apple's iPhone business accounted for 56% of its fiscal 2014 first-quarter revenue, and an even larger portion of is operating profits. As such a large portion of Apple's business, the segment will probably be the biggest driver for Apple stock in the coming years -- even with new product categories on the horizon. Fortunately, several factors point to more growth for the business.

As Fool contributor Daniel Sparks points out in the following video, a growing iPhone business could make the stock undervalued at today's prices.

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  • Report this Comment On March 26, 2014, at 6:23 PM, danialwilson wrote:

    Annual iPhone sales have shot up from 1.4 million when they were first introduced, to 150.3 million in the recently-passed year, and http://goo.gl/ctUShU

  • Report this Comment On March 26, 2014, at 6:26 PM, annaarron wrote:

    The company's deal with China Mobile alone is expected to add 16 million to annual sales in fiscal year 2014 and China being the largest market will generated higher revenues for Apple.

  • Report this Comment On March 26, 2014, at 9:19 PM, Renee wrote:

    Just to add to the above two comments:

    China Mobile deal was expected by most analysts to generate 20M sales in the worst-case scenario. This was factored into the price.

    There are more and more voices now saying that the most-likely number will now be just 16M (yes, a huge number, but a miss with what was factored into the AAPL price).

    Further, the 5C proved to be a huge failure (compared to expected numbers for its sales). It too was factored in to be a success into the current price.

    Lastly, the article says that "AAPL is conservatively valued, with a price-to-earnings ratio of just 13". Uh, how is that conservative, when Apple's direct competitor, Samsung has a price-to-earnings (P/E) ratio of 6.5? Unless that's ultra-ultra-ultra conservative, then AAPL's price-to-earnings ratio is double what it should be, making it super-optimistic.

  • Report this Comment On March 26, 2014, at 10:28 PM, aardman wrote:

    Samsung sells more than just smartphones. It's in a lot of cutthroat and low-margin lines of business. For example, flat screen TVs.

  • Report this Comment On March 27, 2014, at 11:49 AM, hennrymark70 wrote:

    Apple repurchased more than $22 billion worth of shares in fiscal year 2013, and the company expects to return $100 billion to shareholders by 2015

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