Apple Inc (NASDAQ:AAPL) is quite late to the 5G party.
Major smartphone makers started announcing 5G handsets in early 2019 and the rollout soon followed. Apple, on the other hand, did not have a 5G product until it unveiled its “iPhone 12” lineup in October 2020.
Still, that should not change AAPL stock’s status as a top 5G stock.
You see, while there are many different types of 5G stocks, there is one thing I think we can all agree on: a top 5G company should be able to substantially grow its business as 5G adoption increases.
And that’s exactly what Apple Inc is positioned to do.
We know that Apple is a huge company that operates in a number of segments, but making smartphones is hands down its biggest business.
To give you an idea, in its most recent fiscal year, Apple generated $274.5 billion in net sales, among which $137.8 billion came from the sale of iPhones. (Source: “Condensed Consolidated Statements of Operations (Unaudited),” Apple Inc, last accessed December 4, 2020.)
In other words, the little handset is responsible for more than half of the company’s top line.
If you’ve been following Apple stock, you’d know that one of the arguments that bears like to make is that people won’t be upgrading their iPhones as often as before. Think about it: Apple Inc’s products are not cheap, so if you spent over $1,000 for a flagship iPhone not that long ago and its performance is still good, why would you upgrade to the latest model?
To some extent, that has been a valid concern, at least when the difference between a new model and an old one was small. But even then, the sales tended to be stronger than expected.
For instance, the “iPhone 11” lineup was not a huge change from the “iPhone X” lineup—at least from a user’s perspective.
Moreover, because the iPhone 11 was released at a time when other manufacturers were launching 5G products—and the iPhone 11 was not a 5G handset—many reviewers of the iPhone 11 advised consumers to hold out for the next model.
Yet, the iPhone 11 turned out to be a huge success. In fact, it was reported that, in the first half of 2020, the iPhone 11 was the most shipped smartphone in the world. (Source: “Research Reveals that iPhone 11 Was the Most Shipped Smartphone in the First Half of 2020,” 9to5mac, September 1, 2020.)
And now, the 5G capability alone would give users a good enough reason to upgrade to one of the latest models in the iPhone lineup.
Of course, because the iPhone 12 was launched in October rather than at the company’s usual September event, its sales were not included in the company’s most recent earnings report.
However, in Apple’s earnings conference call on October 29, the company’s chief financial officer, Luca Maestri, said that, regarding iPhone 12 sales, management was “incredibly optimistic” about what they had seen so far. (Source: “Apple Inc. (AAPL) CEO Tim Cook on Q4 2020 Results – Earnings Call Transcript,” Seeking Alpha, October 29, 2020.)
Obviously, we started taking pre orders five days ago and it’s a bit early for the phone. But we think that there are a lot of tailwinds this year for iPhone for the entire cycle. Some of the comments that Tim has already made, right, we’ve got the best lineup of iPhones that we’ve ever had. We got an install base of iPhone that is very large [and] continues to grow. It’s an all time high. Obviously, 5G is a once in a decade, opportunity. And as you’ve seen in some markets, certainly here in the United States, carrier offers are very aggressive. And so that is very good for consumers and ultimately, very good for us.
Mind you, it would not be the first time for Apple Inc to be late to a game but still dominate it. Remember the boom in wearable tech a few years ago? Apple launched its first “Apple Watch” in April 2015, at which point the market already had smart watches from a large number of manufacturers.
And yet, Apple quickly took the market by storm and its dominance persisted. Apple captured more than half of the global smart watch market by revenue in the first half of 2020. (Source: “Global Smartwatch Market Revenue Up 20% in H1 2020, Led by Apple, Garmin & Huawei,” Counterpoint Research, August 20, 2020.)
Apple Inc (NASDAQ:AAPL) Stock Chart
Chart courtesy of StockCharts.com
Apple Inc did not provide any guidance, due to the continued economic uncertainty around the world. But with the recent introduction of the iPhone 12 lineup and the holiday shopping season, the company might be able to deliver some blowout results for its December quarter.
Looking at the chart, we see that Apple stock has already gone up quite a bit over the past 12 months. As the company starts to capitalize on 5G adoption, I wouldn’t be surprised to see AAPL stock continue its uptrend.