Does Apple Stock Still Have A Long Runway For Growth?

Its flagship iPhone product has seen a dip in sales, but the tech-giant is showing no signs of slowing down, with a big focus on its services and wearables.

Apple (NASDAQ: AAPL) is a global powerhouse that isn’t showing any sign of an outage. The tech giant saw iPhone sales fall 7%  in Q1 compared to last year, but has been boosted by its services and wearables performance. Despite the ongoing coronavirus pandemic and strong competition, Apple does have a long runway for growth. 

How does Apple compare to other tech giants?

Apple has proven to be extremely durable considering these unprecedented times. Its shares have risen roughly 26% year-on-year and is still generating a high number of sales of its hero product, the iPhone. However, Apple isn’t growing as fast as fellow tech companies, including the likes of Amazon (NASDAQ: AMZN) who has been the go-to for online purchases during COVID-19 lockdowns, with shares up about 61% compared to last year. Revenue from its online sales jumped by almost $30 billion year-on-year and it earned the most revenue of the five big tech’s, of $75.45 billion.

While the other big players including Facebook (NASDAQ: FB), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOGL) are performing well, Apple still has the largest slice of market capitalization. The iPhone maker has a $1.65 trillion market capitalization, followed by Microsoft with $1.61 trillion as of July 8. 

What makes the company strong?

The company experienced an all-time high in its service division which includes Apple Music, Apple TV Plus, and Apple Care. Much of this is based on subscriptions and loyal customers, with huge potential to continue growth for the business. This sector reached a record-high of $13.3 billion in revenue for Q1. 

Its wearables also soared, reaching a quarterly record of $6.3 billion, up by 24% from last year. The sales of AirPods and Apple Watch’s have been performing extremely well, the Watch driving more sales than the Mac and iPad.

Overall, revenue for the second quarter was only up less than 1% from the same time last year at $58.3 billion. iPhone sales did slump by 7%, posting revenue of $29 billion for the quarter, but the strength of the other segments helped carry the business. 

Apple has also joined up with Google to assist the government with contact tracing in the fight against the spread of the coronavirus. Their ECG app can be used to gather remote measurements and assist healthcare professionals who are conducting telehealth services. 

Should you invest in Apple?

The tech company had a blockbuster quarter, smashing records for its wearables and services which shows positive growth for the business. The iPhone products account for almost 50% of the company’s revenue, which shows the product is still making a lot of noise. 

Samsung does pose a strong threat to Apple as it has about 18.5% of the smartphone market share. Also Huawei makes up 14.2% of the market followed by Apple with 13.7%. However, the business is continuing to boost its customer base, and recently launched the iPhone SE which has a cheap entry point of $399 and aims at attracting a wider customer base. Apple bulls also expect iPhone sales to improve towards the end of the year as it is on track to release its iPhone 12 lineup and is shifting towards launching 5G. 

Apple has a long list of drivers that could lead to a jump in its stock. Analysts also predict that the tech company’s market cap could reach $2 trillion towards the end of the year. Apple is a hot buy and the strong growth of its services and the promising launch of its new products show that the future is looking strong. Apple will reveal its third-quarter results on July 30.

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