Source: PaxForex Premium Analytics Portal, Fundamental Insight
Apple has been one of the most successful companies in the past two decades. Its excellent performance has brought its market capitalization close to the astonishing $3 trillion mark.
Experienced investors who follow Apple should know the following things about the company: the iPhone continues to drive sales growth. The company has a strong and growing services segment. And ultimately, Apple has a history of victorious innovation. Let's look at each of these in more detail below.
- iPhone continues to drive revenue growth
The iPhone is perhaps the most successful product of all time. Released more than a decade ago, its new versions bring Apple hundreds of billions in profits. In the most recent quarter ended Dec. 25, iPhone sales totaled $72 billion, up from $66 billion in the same quarter last year. To put this figure in context, Apple's total sales for the quarter were $124 billion. Apple's latest innovation, the iPhone 13, features the latest 5G technology, which is expected to force consumers to upgrade older versions over the next few years.
The iPhone sets the company's flywheel in motion and is an attractive entry point for consumers into the Apple ecosystem. Once a user chooses the iPhone as their phone, they are less likely to switch to another brand due to Apple's customer retention.
This has certainly helped Apple grow revenue from $229 billion in 2017 to $366 billion in 2021. Shareholders will be thrilled if Apple can match or surpass that increase over the next four years. The top-line growth led to an increase in operating income from $61 billion to $109 billion in the same period. Increasing sales by more than $130 billion in four years is no easy feat, but increasing operating profits by $48 billion raises the bar even further.
- Growth in the services segment
Over the past two decades, Apple has built a robust and growing services segment. This business includes such interesting products as Apple Music, Apple TV+, Apple Arcade, iCloud, and others. Consumers like the offerings that complement the iPhone and enhance the iPhone ownership experience. For example, an iPhone user with an Apple Music subscription can create a custom music playlist and start playback with a voice command without touching the phone.
Apple became the first streaming content service to win an Academy Award for Best Picture at the Academy Awards for the film Coda. This recognition could attract a new group of subscribers to Apple TV+, which would be a good fit for an already strong service business.
In the fourth quarter, revenue in these segments rose to $20 billion, up from $16 billion in the same quarter a year earlier. What's more, the services segment posted significantly higher profits than the product segment. Indeed, the services segment had a gross profit margin of 72.4 percent in the fourth quarter, much higher than the 38.4 percent of product sales. For this reason, investors have been encouraged by the growth of the more profitable segment over the years.
- History of innovation
Apple is, without a doubt, a unique phenomenon. The company has a long history of successful innovation. The iPhone is part of a broad portfolio of advanced technologies developed by Apple. These include the iPad, iMac, iPod, Apple Watch, and AirPods. Apple's innovation is not limited to products; it has several well-known services to its credit, including the App Store, iTunes, Siri, Apple Music, Apple TV+, iOS, and others.
The company's success demonstrates how Apple can continue to build popular products and services to increase sales and profits, providing a steady income to shareholders over the long term.
As long as the price is above the 170.30 level, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 171.23
- Take Profit 1: 182.00
- Take Profit 2: 189.60
Alternative scenario:
If the level of 170.30 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 170.30
- Take Profit 1: 161.70
- Take Profit 2: 156.50
