Here’s Why Goldman Sachs Now Sees Value in AAPL Stock
Despite great fundamentals and solid top- and bottom-line growth figures, Apple Inc. (NASDAQ:AAPL) stock remains one of the most speculative stocks on the market. Apple stockholders have been sweating over the stock’s volatile movements amid the rapid long-short betting on the Street. But wait! Wall Street’s top gun, The Goldman Sachs Group, Inc., has finally put AAPL stock on its buy list, setting a $163.00 price target.
Are Good Times Ahead for Apple Stock?
Goldman Sachs has finally come to its senses and is seeing value in Apple’s growing “iOS” ecosystem. A little too late to the party? I say, but better late than never. Goldman Sachs analysts believe that should the tech company effectively monetize its services like “Apple TV” and “Apple Music,” it might be able to increase its average revenue per user (ARPU) by more than threefold. (Source: “Goldman Says to Buy Apple Because It’s Becoming a Services Company,” Bloomberg, November 18, 2015.)
Earlier last week, I discussed the concept that Apple stands to gain massive ground in the “Internet of Things” (IoT) ecosystem as it expands its iOS platform for its users to reach beyond just typical phone use. (Read “AAPL Stock: Apple Inc.’s Next Move Could Be Bigger Than the iPhone.”)
The notion that commoditization has already begun for Apple products may hold some water. Should the company fail to evolve its iOS platform into a money-pumping ecosystem, Apple’s hardware will eventually meet the same fate as BlackBerry Limited’s—a redundant, old, boring product with nothing new to offer. AAPL bears are already citing lack of innovation for their short thesis on Apple stock.
Now, Goldman Sachs analysts consider 90% of Apple’s “iPhone” users to be repeat customers. This is a striking number and translates into strong customers loyalty and brand recognition for the product. Inarguably, Apple has a lot of room to capitalize on these stats by expanding its scope beyond products to services.
While Goldman Sachs is seeing value in its TV and Music service, I’m considering other avenues, as well. Speaking of services, “Apple Pay” is probably the first service that catches my attention.
Concerning this application, two significant moves were made in the last week alone. One, Apple Pay launched its first P2P service that competes with PayPal’s dominant “Venmo” service. Two, Apple Pay launched into China earlier this week in an effort to tap into its fastest-growing market. I’m wholeheartedly welcoming Apple’s foray in this niche.
All big tech companies, including Amazon.com, Inc., Alphabet Inc, International Business Machines Corporation, HP Inc., Facebook, Inc., and others, are seeking similar niches in the services sector to gain a hold over the growing machine-to-machine ecosystem, which relies on connecting devices in a way that users are able to service most of their needs in real time through handheld devices.
The Bottom Line on AAPL Stock
Despite posting great earnings and far outperforming the S&P index, AAPL stock is starting to disappoint loyal investors. After a neat run, the stock is trailing back to where it started the year. Certainly, the negative commentary from Wall Street analysts has been weighing down heavily on Apple’s stock performance. However, now that we’re seeing the Wall Street tides shifting in its favor, there may be no stopping a rally in Apple stock.
In a nutshell, Apple is right on track to unlock value from the rising phenomenon of the Internet of Things. If the company’s management stays committed, we’ll soon see a turnaround in AAPL stock.
The bottom line: AAPL stock is here to stay and poised to soar.