AAPL Stock: This Is Why Apple Inc. Could Surge in 2016

AAPL StockIn the eyes of many investors, Apple Inc. (NASDAQ:AAPL) stock is not what it used to be. After the “iPhone” became a must-have for consumers around the world, the market is wondering whether the company can find its next growth engine. Luckily, Apple stock still has quite a few things going for it.

Apple TV: The Future of TV?

When you think about tech giants changing the TV industry, Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) would probably be the first ones to come to mind. No doubt, these two companies’ huge content libraries have helped them get a head start in the on-demand video streaming business.

This time, though, it’s the iPhone maker that wants a piece of the action. However, Apple is not competing with them directly. Rather, it has built something it calls “the future of television.” (Source: “Apple’s Tim Cook: ‘WE Believe the Future of TV is Apps’,” The Wall Street Journal, September 9, 2015.)

According to Apple CEO Tim Cook, “the future of TV is apps.” Instead of just launching a video streaming service, the company gave Apple TV a huge revamp last year. For the first time, Apple TV supports third-party apps.

Basically, Apple TV could be the entertainment hub of your house. The remote supports Apple’s voice assistant “Siri” and also has touch-sensitive capabilities. As for gaming, do you feel that playing games on your iPhone or “iPad” doesn’t give you a good enough gaming experience? Well, there’s good news. Since Apple TV supports third-party apps now, you can easily use it as a gaming console.

The best part is that it won’t interfere with your love for Netflix. Through the Netflix app, you can watch all your favorite shows on Apple TV.

2016 Could Be a Huge Year for iPhones

We have all heard about the concerns surrounding Apple’s core business—iPhones. Whenever something negative came out of the iPhone’s supply chain, Apple stock almost always took a hit. And it’s easy to see why: iPhone sales made up 68% of Apple’s revenue last quarter. (Source: “Apple Inc. Q1 2016 Unaudited Summary Data,” Apple Inc., January 26, 2016.)

However, this also means that if the outlook for the iPhone improves, AAPL stock could get substantial upward momentum. The catalyst could be right around the corner: Apple is expected to release a new flagship smartphone, the “iPhone 7,” this September. Based on the update cycle of the company’s products, this year would be the year of a major update. Last time the company put a new integer to its iPhone, sales absolutely skyrocketed and AAPL stock went on a solid bull run.

The neat thing is that the last major update was the “iPhone 6,” which was released two years earlier in September of 2014, and no doubt, a lot of people bought it—75 million units were sold in the first three months. By this September, many of those who first bought the iPhone 6 on a two-year contract will be eligible for a device upgrade with their service providers. The upgrade cycle suggests that iPhone 7 sales could be huge.

The Bottom Line on AAPL Stock

At the end of the day, let’s not forget the kind of valuations Apple stock carries today. Trading at $109.17 per share, the stock has a price-to-earnings (P/E) multiple of 11.62X, much lower than the electronic equipment industry’s average P/E of 18.33X.

It’s not clear how long it would take for Apple TV to really become the ubiquitous choice for living room entertainment. And the upcoming iPhone 7 sales could have some uncertainty. But this doesn’t change the fact that at today’s prices, AAPL stock could be offering significant value.