For many years now, Apple (AAPL 0.38%) has been one of those companies that make investors daydream about being able to travel back in time. Imagine buying in at $22 a share on Dec. 12, 1980! Forty years later, Apple's stock has split four times and reached a recent all-time high of $327.20 on Feb. 12, 2020.
But daydreaming alone doesn't really get you anywhere as an investor. And just because the stock is trading near record highs doesn't mean it's too late to benefit from Apple's success. Apple isn't done growing yet, and the temporary supply and demand issues caused by the novel coronavirus (which causes the disease COVID-19) may have created an opportunistic price drop for investors to get in on Apple's prosperity.
Image source: Getty Images.
The voice of naysayers and the consumer response
Not everyone believes that Apple will maintain its good fortune.
Some critics have argued that when Apple's then-CEO, Steve Jobs, left his post in August 2011 (and died in October of that year), the company lost its main creative force and innovative edge. Since that time, the critics argue that Apple has relied too much on its production of the iPhone and its prominent brand to power the company's financial success.
Consider the trio of series 11 iPhones (iPhone 11, iPhone 11 Pro, and iPhone 11 Pro Max), all released in September 2019. Apple critics argue that these phones contained only incremental changes (such as an improved screen and a night mode camera feature) when compared to the iPhone X. When compared to the iPhone's competition, such as Samsung's Galaxy m30 (released February 2019), some may even see bigger disappointments. The Galaxy m30 comes with a starting price of $240 (iPhone 11 starts at $700) and includes 20 days of battery life on standby mode (iPhone 11, 6.3 days on standby mode) and a 6.4-inch screen (iPhone 11, 6.1-inch).
Despite the strong competition, sales of the iPhone 11 still did well in the first quarter of 2020 (which includes the holiday shopping season), likely due to the phones' seamless integration with other Apple products, the company's loyal consumer base, and widespread marketing. In a report by Consumer Intelligence Research Partners (CIRP), the iPhone 11 models made up 69% of all iPhones sold in the United States between October and December 2019.
Furthermore, Apple achieved double-digit growth for its fifth consecutive quarter in its services segment, which encompasses iCloud, Apple Music, and Apple Pay, and its wearables department, which includes AirPods and the Apple Watch. While Apple's services and wearables may not have been as groundbreaking as the iPhone, consistent growth in these sectors provides the company with multiple revenue channels (some with significant recurring revenue). As Apple continues to branch out into new segments, the company will need to rely less on its sales of iPhones to fuel its impressive revenue.
Why Apple won't slow down
Since Tim Cook took over as CEO in August 2011, the company's stock is up about 480%. And in 2018, Apple became the first publicly traded company to hit a market cap of $1 trillion. As thrilling as these numbers are, Apple seems to just be getting warmed up.
During the company's January earnings call, Apple reported record-breaking growth in quarterly revenue, net income, and earnings per share. Its products brought in a whopping $79.1 billion, which is up 8% compared to the same quarter in 2019. The tech company also boasted 17% growth in its services revenue for the quarter, which brought in an all-time record of $12.7 billion. And if that isn't saying enough, Apple's wearables, home and accessories set a record with $10 billion in revenue and witnessed a 37% revenue increase when compared to Q1 2019. Wearables, Home and Accessories established a new all-time record with revenue of $10 billion, up 37% year-over-year
Even with its steady growth, Apple has no intention of losing the interest of its consumers any time soon. According to Bloomberg, Apple's 2020 product lineup is believed to include some invigorating features that will provide a wow factor the iPhone 11 series lacked. Rumors of these new products encompass features such as 3-D sensors, 5G connectivity, and sleep tracking technology. Apple may also offer a services bundle to boost its subscribers and engage a wider consumer base.
While we must wait for official news on Apple's 2020 launches, investors may encounter a unique opportunity around the company's second-quarter earnings call, taking place in April. Due to the continued effects of the coronavirus, the company announced in an investor update on Feb. 17, 2020, that it does not expect to meet its previous revenue guidance. Therefore, if there are any temporary drops in Apple's stock prices due to the coronavirus, now may be an excellent time for investors to buy Apple stock.
