Apple made history in August as the first company to surpass a market valuation over $1 trillion — a triumphant milestone. (Full disclosure: Author owns Apple stock.) For the rest of the summer and early into fall, the stock rallied, peaking just above $230 before pulling back slightly. Beginning in November and through December, the stock plunged, hitting prices below $150. Almost two years of price appreciation was lost within weeks.
So far in 2019, the stock has come back above $180. To buy or sell at this point boils down to whether traders believe Apple can continue to grow. There are two strategies to grow sales: sell more to current consumers, or expand and attract consumers in new markets. Below, I share my thoughts of Apple’s growth opportunities from both the bear and bull perspectives.
Apple is one of the best — if not the best — at marketing in the Americas, where it earns over 40% of its revenue. The array of new wearable accessories produces upsell opportunities to further entrench Apple’s dominant market share. In a recent interview, Tim Cook noted that “revenue for wearables is already 50 percent more than iPod was at its peak.” These new product complements could easily boost revenues to maintain growth.
The enterprise space is an area of growth where Apple is often overlooked. At the moment, Windows and the personal computer dominate this market with little competitive pressure. However, I believe Apple can quietly overturn and gain market share in the coming decade. The explanation for this is simple: Many startups in Silicon Valley are motivated to use Apple products. Having lived in San Francisco myself, the Apple fan base there is strong, and using anything other than Apple is taboo. This next decade is expected to be one of rapid technological innovation. Many of these startups will disrupt and displace long-standing incumbent enterprises. As the digital revolution continues, the next decade is an opportunity where Apple could easily dominate the enterprise space.
Bears concerned with slowing sales have solid arguments. Apple’s sales in China slowed significantly in 2018. Entering new markets poses challenges for all organizations, and international expansion takes time. For Apple, the key to success, in my opinion, is global growth. However, the read on global economic growth at the moment is not clear, with negative signals from both Europe and Asia. It therefore makes sense for cautious investors to pause and wait for more promising data.
Tech companies operate in fiercely competitive environments with short product life cycles. So it’s no wonder that investors quickly get nervous about growth. Apple bulls still have many growth opportunities to rally behind, while bears have significant data to promote caution. In the coming months, both sides of the trade will be closely monitoring incoming economic and sales data. The new information will either encourage the market to confidently resume the current uptrend, or alternatively, the plunge of December may have been foretelling of new lower lows to come. Given Apple’s market capitalization and weight on major stock indexes, regardless of the up or down outcome, I believe the entire stock market will, in the short run, follow Apple’s direction.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
