After delivering another record quarter, and pledging to return as much as $200 billion to shareholders, Apple (NASDAQ:AAPL) stock is trading near an all-time high. With its market cap around $735 billion, Apple is the largest company in the world, and the largest component of the S&P 500.
But could Apple be headed for new highs? While it's impossible to say for certain, there are a number of factors that could work in Apple's favor. Below are three scenarios that, if they came to pass, would likely benefit Apple shareholders.
The iPhone continues to take share from Android
During Apple's most recent earnings call, CEO Tim Cook dropped the word "switchers" four times. Cook was referring to Android switchers -- iPhone buyers who, in the past, owned an Android handset.
Although smartphone ownership is still in the minority on a global basis, most developed economies have long been saturated. Apple can still rely on its army of loyal customers to upgrade their existing iPhones every so often, but it's becoming increasingly difficult to find new buyers to sell to.
Apple can grow its iPhone business by capturing Android users. Google's mobile operating system powers about eight in ten smartphones sold worldwide, giving Apple ample opportunity. Cook didn't give out exact numbers on the conference call, but said that Apple was seeing a higher rate of switchers than in previous iPhone cycles -- the iPhone 6 and 6 Plus, with their larger screens, are helping Apple take share at Android's expense.
In a report released earlier this month, Kantar Worldpanel declared that, in the first quarter, almost one-third of Apple's new customers in Europe's five largest countries came over from Android. If that trend continues, Apple's stock could continue to move higher.
Apple's shrinking tablet business recovers
The stunning success of Apple's iPhone has largely masked the disappointment in its tablet business. For over a year, Apple's iPad has been in decline, with sales slipping almost continuously. In fact, last quarter, Apple's tablet business actually fell behind its Mac in terms of revenue.
Apple's iPad business is far from terrible -- it still generated $5.4 billion last quarter -- but the general trend underscores a larger risk. The iPhone alone is now driving the bulk of Apple's financial performance. If demand for the iPhone were to slip, Apple would not have a strong iPad business to fall back on.
If Apple could turn its tablet business around -- perhaps with a series of new models, or a more intriguing corporate-focused offering -- it may provide a boost to Apple's stock.
Apple Watch -- or another product -- becomes a massive success
Failing that, Apple could always look to new markets for its next successful product and source of revenue diversification.
The Apple Watch stands out as the most obvious opportunity. It's Apple's newest product, and its first wearable. Unfortunately, it currently depends on a tethered iPhone to function, limiting its potential market, but strong demand for the watch in the coming quarters could significantly strengthen Apple's business. For now, Apple is relatively mum on its expectations -- it isn't even disclosing unit sales -- but in time, the Apple Watch could become a major source of revenue in future quarters.
There are other possibilities. Apple's management has made no secret of its interest in TV. In June, at Apple's Worldwide Developers Conference, it's expected to unveil the successor to its Apple TV set-top box. As Internet video matures, the market for smart TVs and set-top boxes should only increase. In addition to selling hardware, Apple could also strengthen its hold on content, selling media, streaming services, apps, and games to Apple TV owners.
A new blockbuster product could certainly boost Apple's shares.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.