It’s not often that you get a safe bet, but Apple is one of the safest around and could be a bargain right now.
You don’t often find Big Tech stocks being touted as great growth opportunities, but it’s important not to ignore them either. One company that is almost impossible to ignore is Apple (NASDAQ: AAPL). After all, I am typing this story on a Macbook Pro while listening to Apple Music through my AirPods, often glancing at my Apple Watch Series 6 to check the time, and accessing the news through my iPhone XR.
While that whole sentence screams privilege, might I just add a friendly disclaimer that I am simply terrible with money and can’t actually afford these things. I am a slave to capitalism.
Anyway, let’s not go down that rabbit hole. Let’s focus on how Apple is shaping up ahead of its Q4 earnings, as well as the exciting growth that it could experience in 2021.
What can we expect from Apple next week?
I don’t have a Magic 8-Ball, but I do know that you should never, ever, underestimate Apple.
Just look at its 2020 performance after iPhone sales slumped; its stock price grew 80%. While iPhone revenue contracted 3.2% year-over-year, services grew 16%, tablet and PC sales soared 11.3%, and if you want to check out how its wearables and other businesses did, then look no further than the graph below.
All that aside, with the iPhone still representing almost half of its total revenue, shouldn’t Apple investors be concerned about a slump?
Of course, but what they may have forgotten is that the 5G trend is only getting started. Apple is likely to corner a nice chunk of this growing market in 2021, with supplier — Murata Manufacturing — estimating that at least 500 million 5G smartphones may be shipped this year, up from an estimated 300 million units in 2020.
Meanwhile, despite representing 19% of Apple’s total 2020 revenue, tablet and PC sales are expected to grow even more in 2020. Apple struggled with components supply last year due to changing manufacturers and COVID delays, but that is largely resolved in 2021. As well as that, Apple is now producing its own M1 chips for its devices, meaning that it keeps more of the profits per unit sale.
2021’s Services revenue also has a new weapon: Apple One. The bundle brings many of Apple’s services under one umbrella for a reasonable price and will help it to grow its subscriber numbers across Apple Music, Arcade, TV+, iCloud, Fitness+, and more. With services now representing close to 20% of Apple’s total revenue, this is a space that investors should watch carefully.
It looks like Apple is on track to benefit from increased services and hardware demand in 2020, as well as increased moves away from third-party reliance. Despite being the world’s most valuable business, there is still a strong sense that the iPhone-maker has a lot left to give, so for investors, any dip in price should be a golden opportunity. Judging from expectations, there may not be many such chances following next week’s earnings call.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.