It's official. Apple is the most valuable company in the world, beating other tech giants to the punch by hitting a market cap of $1 trillion last week.
The better-than-expected results sent the share price flying, reaching $208 by close of trading on Friday, up more than nine per cent in just three days.
Just think: if youd invested in Apple when it first listed on the stock exchange in 1980 (for $22 a share), you would have made an impressive return. According to Investopedia figures, an investment of $990 on Apple's initial public offering would have generated a return of more than $521,740 after stock splits – and thats not even including dividends.
But you would have also needed unflinching confidence in the company during some tricky times – including the 20 years when the share price barely budged, the years without its co-founder (the late Steve Jobs), and during the dotcom bust of 2000.
Even when its share prices started gaining momentum in 2009, you would have needed to remain committed during some rather large wobbles.
Today, Apple might look poised to take over the world, but is it too late for traders to jump on the bandwagon? The key, of course, lies in how the future looks for this trillion dollar company.
Apple core
Now, the truth is that product sales havent been great.
Apple sold 41.3m iPhones during the last quarter, which is only a marginal increase from the 41m sold over the same period last year. iPads also saw a one per cent rise in sales, while Apple Macs saw a 13 per cent slump.
If youre in FAANGs now, I dont see why you wouldnt opt for relative safety in Apple, whose multiples remain well short of its peers
These figures certainly play out concerns that Apples core growth – which has come from selling hardware units – is now starting to run out of steam.
Read more: Apple becomes the first US company to hit a $1,000,000,000,000 valuation
The Apple of my i… Phone
But we shouldnt be overly concerned. Apple-lovers will be waiting to upgrade to the latest iPhone model this autumn, which should give the company another healthy bump.
And while Apple saw a less than one per cent uptick in the number of iPhones sold over the year, bear in mind that the tech giant is in a prime position to raise its prices.
Apple fans werent put off by the $999 price tag for the iPhone X, which helped to boost iPhone revenue by 20 per cent throughout the year. Indeed the company took a gamble in charging a higher price for the newest model, but in doing so, it has proven how loyal its customers really are.
While the iPhone remains the companys flagship product, its now only one piece of the overall puzzle. Apples non-core products (including Apple Watch, Beats, and HomePod) have seen the biggest boost in revenue over the year, jumping an impressive 37 per cent.
And hardware sales aside, the firms services – which include AppleCare and Apple Pay – are up 31 per cent.
“Flourishing services and app store revenues more than compensated for sluggish volume growth in iPhones, iPads and Macs,” says AJ Bells investment director Russ Mould.
But he also says investors shouldnt be complacent. “Apple may need to keep developing its revenue streams from services – since slowing hardware volumes pose a challenge. And it remains to be seen just how far it can squeeze up iPhone prices as it launches next-generation products.”
Read more: Failure is at the core of Apples success
Coming to fruition
Despite Moulds words of warning, Apple seems to be succeeding where many of its FAANG peers (Facebook, Amazon, Netflix and Google) have so far failed – that is, growing global market share, and even making progress in China. Over the past year, figures show that the company has seen 19 per cent growth in the Greater China region. Clearly Apples presence in China has not yet been hit by the trade war between the US.
“The better product mix and higher value iPhone X is making a difference in this luxury-conscious market,” says Neil Wilson, chief market analyst at Markets.com, pointing out that the company saw double digit revenue growth everywhere except Japan.
Predictions for the next quarter look positive, with Apple forecasting revenues between $60bn and $62bn (significantly higher than the $53bn figure for the quarter just gone).
Given that this is the key quarter for the next round of iPhones, Wilson says that this is probably the most important metric. “This points to greater confidence that Apple can shrug off a flattening growth curve in smartphone sales.
“If youre in FAANGs now, I dont see why you wouldnt rotate some equity out of more exposed companies like Facebook and Netflix and opt for relative safety in Apple, whose multiples remain well short of FAANG peers.”
Apple also has plenty of cash on its balance sheet, which gives it room to invest – both in the company, and potentially acquiring elsewhere.
So the bottom line? If you dont hold any Apple shares, now is the time to buy. And if you already own some, take a bit of profit.
