Please ensure Javascript is enabled for purposes of website accessibility

Tim Cook: Apple, Inc. is Killing it in China

By Daniel Sparks - Sep 17, 2015 at 2:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Read this before you conclude China's struggles will serve as a stumbling block for Apple.

At $116, Apple (AAPL 2.29%) stock may not be the same buying opportunity it was in late August when shares traded close to $100, but about $19 below its all-time high, and with shares trading at a meaningful discount to the S&P 500, the stock is still looking tasty. Indeed, some of the very concerns that may be keeping the stock suppressed are arguably overdone -- specifically, worries about Apple's waning growth potential for Apple's iPhone business in China.

Enter Apple CEO Tim Cook: The one person who would know best about Apple's struggles in China seems to be the most bullish on the company's potential in the country.

Apple CEO Tim Cook at Apple's September 2015 product launch event. Image source: Apple.

During Apple's September event, the CEO described iPhone sales around the globe as growing "by leaps and bounds." China, specifically, is among its hottest markets, with iPhone sales in the country soaring 75%, year over year, during the last quarter, Cook said, noting this growth easily trumps a 4% decline in year-over-year sales for the rest of the industry's performance in the country.

IDC data from Q2 smartphone sales in China is used for chart. Chart source: Apple's September event.

"But this data is from the second calendar quarter," some critics may protest, "What about demand for iPhone in China today?" iPhone continues to be a blockbuster hit in China, according to the most recent data provided by Apple -- data which was collected after China's decision to devalue its currency.

"Growth in iPhone activations has actually accelerated over the past few weeks," Cook said in a public letter to CNBC's Mad Money TV host and investor Jim Cramer on August 24. The bullish note from Cook came just as Apple stock was trading around $103, and probably at a time when the company was spending billions of dollars repurchasing its own shares.

"I continue to believe that China represents an unprecedented opportunity over the long term," Cook said later in the letter.

Apple in China: What's next?
Probably more solid growth. Apple has two near-term catalysts working in its favor for iPhone sales in China.

1. An iPhone launch in China. Last year, China was notably absent from the launch countries for iPhone. The phone didn't launch in the world's largest smartphone market until October 17 -- about a month after it launched in the U.S. But this year the company is bringing its latest iPhone model to China on the same day it will be available in stores in the U.S.: September 25.

And the iPhone 6s and 6s Plus look poised to be a winning duo in China. Given the current hot streak for Apple's iPhone 6 and 6 Plus line, which marked the tech giant's first foray into phablet territory, in China, Apple is just adding fuel to the fire with the improved versions of the same form factor.

2. Plenty of room for further LTE penetration. The greatest driver for Apple's iPhone success in China has been the country's growing 4G penetration. This massive catalyst started gaining steam in January 2014 when Apple launched its first iPhone with the world's largest carrier, China Mobile, alongside the carrier's aggressive rollout of its 4G network.

Since January 2014, the China's biggest wireless carrier's 4G customers have soared from zero to 209 million. Going forward, the opportunity for further 4G penetration remains enormous. China Mobile currently has 210 million 3G customers.

China may be up against some formidable headwinds. But Apple looks poised to continue charging hard amid these challenges.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$148.87 (2.29%) $3.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.