There Is No Looking Back for AAPL Stock
Apple Inc. (NASDAQ:AAPL) stock touched an all-time high of $140.28 last Thursday and is the top gainer in the Dow Jones Index this year. Apple stock has gained more than 20% in the year to date with no slowing down in sight.
As the “iPhone 8” frenzy grows with every passing day, investors are looking at the possibility of Apple becoming the first trillion-dollar company ever. Apple Inc. is already the most valuable company in the world with a market capitalization of more than $730.0 billion. AAPL stock closed at $139.34 Monday.
After getting hammered in the year 2016 over declining iPhone sales, AAPL stock started to recover at the start of 2017 on better-than-expected iPhone sales data. The stock really took off after the consumer technology giant announced better-than-expected Q1 results. Apple stock has already risen by almost 15% since the results were announced for the first quarter, which turned out to be a blockbuster quarter for the Apple Inc. The rise in shares has been strong over the past month as clear from the chart below.
As investors celebrate the Apple stock resurgence, rumors surrounding the next-generation iPhone keep getting louder. MacRumors says that a new supply chain report claims that Apple is planning to use OLED for every iPhone model by 2019, with the company expected to adopt OLED panels for 60 million units of the iPhone 8 later in 2017. The same report also claims that both Samsung and Inteflex are currently gearing up production for flexible printed circuit boards (FPCB) for this year’s iPhone 8. (Source: “Apple Aims to Make Every iPhone With an OLED Display by 2019,” MacRumors, March 6, 2017.)
Moreover, Apple is expected to announce a new “iPad” in an event scheduled later this month, with features like the Apple Pencil, a built-in camera, and recording functions. Investors expect that the iPhone 8 would be a huge hit and the new product lineup will provide that extra edge to Apple stock.
Warren Buffett Takes a Liking to AAPL Stock
There was more buzz generated around AAPL stock last month when it became known that Warren Buffett’s Berkshire Hathaway had been buying the stock since last year. Not only that, Buffett more than doubled his stake in the smartphone company since January this year. This was enough to dispel whatever doubts investors had about the future growth of Apple.
As is well-known, the “Oracle of Omaha” likes to invest in companies that have a strong economic moat and Apple fits that requirement perfectly. In an interview with CNBC, Buffett said that although Apple Inc. is very tech-involved, it is a consumer product company to a great extent. And when he started asking people questions about the company, he realized that Apple had quite a sticky product and a very useful product that people would use. (Source: “Here is the full transcript of billionaire investor Warren Buffett’s interview with CNBC,” CNBC, February 27, 2017.)
He further added that Apple CEO Tim Cook has done a terrific job and has been very intelligent about capital deployment.
In the interview, Warren Buffett was also asked which company he thinks would reach $1.0 trillion first—Apple or Berkshire Hathaway?
Buffett replied that he would bet on Apple as it has a stronger position!
This sums up why Apple stock has more upside than downside going forward. The company has built a strong ecosystem, which will strengthen further in the coming years.
The Next Big Thing for Apple Stock May Not Be the iPhone
While the iPhone 8 seems to be hogging all the limelight right now, the story may be developing elsewhere for AAPL stock. Although the repatriation of overseas cash and expected strong growth in emerging markets like India are huge tailwinds, the real excitement is how Apple will play its content card.
The New York Post reported Friday that senior Apple executives have been meeting some of Hollywood’s most successful TV and film producers over the last couple of weeks about the possibility of working together. The company’s ultimate goal, according to one of the executives, seemed to be a transformative acquisition and not just buying TV shows. (Source: “Apple execs vying for original movie, TV deals,” New York Post, March 3, 2017.)
Apple has been interested in original TV programming for a while now but last week’s meetings between Apple SVP Eddy Cue and Paramount Pictures, as well as Sony TV, give the impression that Apple is looking for something way beyond the extraordinary.
With companies like Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) spending huge amounts in original and innovative content, Apple has a lot to compete with and a lot to prove. But the rewards may worth be the risks; and could propel Apple stock to new highs.
Apple Could Be the First Trillion-Dollar Company!
Tim Cook said at the company’s annual shareholder meeting last month that Apple has some products other than the iPhone that are “essential to Apple’s growth.” Apple was investing a big amount in research and development, including “future stuff [he] can’t talk about.” (Source: “Apple CEO Tim Cook predicts tons of revenue from ‘future stuff I can’t talk about’,” CNBC, February 28, 2017.)
Cook also praised Warren Buffett’s Berkshire Hathaway for thinking long term.
The Apple CEO has also been vocal about his fascination with Augmented Reality, which he thinks holds lot of promise and that investors are hopeful would define the next major wave of innovation from Apple Inc.
By focusing on a new and exciting iPhone, and strengthening the ecosystem through unique content and AR apps, Tim Cook plans to increase the stickiness of Apple offerings. This is precisely the reason why Buffett thinks Apple is a great investment.
Apple stock posted a new high last Wednesday when it closed at $139.79. As investors look for another closing high in the coming days, Apple stock could gradually move towards that milestone on strong growth catalysts.