Apple (NASDAQ:AAPL) investors are often obsessed with two things -- rising iPhone sales and falling iPad sales. Those two devices accounted for 69% of Apple's revenue last quarter, but the company's long-term future extends far beyond smartphones and tablets. Let's take a closer look at three upcoming catalysts for Apple in 2015 and beyond -- HealthKit, HomeKit, and Apple Pay.
Smarter health monitoring: HealthKit
HealthKit is a unified platform for fitness apps, wearable devices, and electronic health records (EHRs) on iOS 8. Apple's Health app pulls all this data together onto a single unified dashboard.
With HealthKit, biometric data can flow from a user's wearable devices to an iPhone, and be backed up to an EHR for physicians and insurers to access. This could reduce the number of clinical errors, improve remote monitoring of patients, and pave the way for better telehealth consultations.
HealthKit places Apple at the crossroads of several high-growth markets. Paired with the upcoming Apple Watch, HealthKit helps Apple tap into the wearables market, which could grow from 4 million shipments in 2013 to 330 million by 2018, according to ON World. It also gives Apple a foothold in the mobile health industry (all fitness apps, devices, and wearables), a market that Grand View Research forecasts will grow from $1.95 billion in 2012 to $49 billion by 2020.
HealthKit is the most advanced "unified health dashboard" at the moment, but competitors aren't far behind. Microsoft's (NASDAQ:MSFT) Health app offers similar features, and backs up health data to its cloud computing platform,l Azure. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) recently launched Google Fit, a similar synchronization platform that currently lacks HealthKit's EHR integration.
Smarter homes: HomeKit
Apple is also expanding that "hub" strategy into smart homes with HomeKit, a platform that lets compatible devices like smart lightbulbs, fans, locks, thermostats, garage doors, and power outlets interact with an iOS device.
Last October, Apple unveiled its first 17 HomeKit Partners, which included Marvell, Philips, Broadcom, Belkin, and Withings. It also introduced HomeKit support for Apple TV, turning the set-top box into a central hub for Apple-powered smart homes. If HomeKit is successful, Apple could expand into the growing smart home industry, which Juniper Research forecasts will grow from $33 billion in 2013 to $71 billion by 2018.
Of course, Apple isn't the only company tapping into that market. Earlier this year, Google closed its $3.2 billion acquisition of Nest. Google plans for Nest's smart thermostat to become a central hub for its smart homes. Google complemented that purchase with two more start-ups -- Wi-Fi webcam maker Dropcam and smart home platform developer Revolv. Meanwhile, Samsung (NASDAQOTH: SSNLF) is installing wireless chips in its appliances and home electronics to ensure that they are compatible with smart homes.
Smarter wallets: Apple Pay
Last but not least, Apple wants to create a digital wallet. Apple Pay, which it introduced with the iPhone 6, lets users scan and digitally store credit cards in the Passbook app. To pay, users hold a finger over the Touch ID scanner and tap the iPhone to a payment terminal. Apple has stated that over 220,000 merchant locations -- including Macy's, McDonald's, and Whole Foods Market stores -- accept Apple Pay.
The warm market reception for Apple Pay is surprising, since NFC (near-field communications) chips failed to catch on when Google launched a similar platform, Google Wallet, in 2011. Google Wallet flopped because Softcard (a competing mobile payments partnership between AT&T, Verizon, and T-Mobile) blocked the service on its Android devices, nearly killing the platform in the U.S. This forced Google to circumvent Softcard's bans with HCE (host card emulation) in Android 4.4 devices.
Despite its resistance to Google Wallet, Softcard allowed Apple Pay onto its iPhones, presumably because it didn't want to cripple one of the iPhone 6's top new features. Apple Pay still faces resistance from competing platforms like the Merchant Customer Exchange's CurrentC, but there's evidence that usage is on the rise. According to CEO Tim Cook, Apple Pay saw a million credit card activations within its first 72 hours of availability. A November survey from Retale also showed that Apple Pay already claimed 10% of the mobile payments market, surpassing Google Wallet's 8% share but still trailing eBay's PayPal, which still controlled 51%.
Forrester Research expects the U.S. mobile payment market to grow from $12.9 billion in 2012 to $90 billion in 2017. If Apple Pay keeps growing, it could become a new pillar of growth for the tech giant.
Smarter bets on the future
Apple investors shouldn't obsess over iPhone and iPad sales. New software services like HealthKit, HomeKit, and Apple Pay could help its iTunes/Software/Services segment -- which only accounted for 11% of its revenue last quarter -- become a much more relevant part of its revenue. That would not only reduce the weight of hardware on Apple's top line, but it would also tether more users to its iOS ecosystem.