Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services. The company’s hardware products include the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, apple watch smartwatch, apple tv digital media player, and the HomePod smart speaker. Apple’s software includes the macOS and iOS operating systems, the iTunes media player, the Safari web browser
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Reasons for Optimism
iPhone sales growth
Apple’s iPhone sales growth has been one of the key reasons for optimism about the company’s future. In the fiscal year that ended in September, iPhone revenue rose 17% to $61.6 billion. That performance was driven by strong demand for Apple’s latest iPhones, the iPhone 8 and iPhone X.
In the first quarter of 2018, Apple sold 77.3 million iPhones, which was a slight decline from the same quarter a year ago. But it was still better than what analysts had been expecting. And Apple’s average iPhone selling price increased to $796 during the quarter, which was also higher than what analysts were expecting.
There are several reasons to believe that iPhone sales will continue to grow in the future. First, there is a large and growing market for smartphones. According to IDC, worldwide smartphone shipments grew 3% in 2017 to 1.47 billion units. And IDC expects shipments to grow 2% in 2018 and 1.5% in 2019.
Second, Apple still has a large number of customers who are using older iPhones and who will eventually upgrade to newer models. According to CIRP research, nearly 50% of existing iPhone users are using an iPhone that is more than two years old. That means there is a big opportunity for Apple to continue to grow its installed base of users by convincing them to upgrade to newer iPhones.
And third, Apple’s new lineup of iPhones is very appealing and should help drive upgrading among current users and attract new users as well. The new lineup includes the ultra-premium iPhone X, which starts at $999; the premium iPhone 8 and 8 Plus; and the more affordableiPhone 7 and 7 Plus. There is something for everyone in Apple’s new lineup, which should help boost sales going forward.
Diversification of product line
One of the reasons for optimism about Apple’s future is the company’s diversification of its product line. In addition to its iconic line of iPhones, Apple now offers a range of other products, including the iPad,apple watch and MacBook. This diversification means that Apple is less reliant on the iPhone for its revenues and profits, and therefore less exposed to economic downturns or changes in consumer taste.
Another reason for optimism about Apple is the company’s strong financial position. As of 2019, Apple had a cash reserve of $245 billion, and it generated annual revenues of $265 billion. This financial strength gives Apple the resources to weather any storm and continue investing in new product development, making it well-positioned for long-term success.
Apple’s services businesses are its fastest-growing, most profitable businesses. Apple’s App Store, iCloud, Apple Music, and other services generated $13.3 billion in revenue in the company’s most recent quarter, up 24% from a year ago. And Apple’s services businesses are growing faster than the overall services industry:
Apple is also becoming more efficient in generating revenue from its services businesses. The company’s gross margin on services was 63% in its most recent quarter, up from 58% a year ago.
And Apple still has a huge opportunity to grow its services businesses: only about one-third of iPhone users currently pay for an iCloud subscription, and less than 20% of iPhone users have apple music subscription
Reasons for Pessimism
There are a number of reasons to believe that Apple stock will not be worth as much in 10 years as it is today. One reason is that the company is reliant on the iPhone, and if that product line begins to decline in popularity, the stock price will likely follow suit. Additionally, Apple has a history of making products that become obsolete relatively quickly, which means that customers are always need to buy the latest and greatest version, and this could eventually lead to customer fatigue.
iPhone sales growth is slowing
One of the main reasons for pessimism about Apple stock is that iPhone sales growth is slowing. In the first quarter of 2019, iPhone revenue was down 15% from a year earlier. This is a trend that is likely to continue, as the market for smartphones matures and iPhone users hold onto their devices for longer.
Another reason to be pessimistic about Apple stock is the company’s dependence on China. China is Apple’s second-largest market, and sales there have been declining in recent years due to economic slowdown and trade tensions.
Finally, some investors are concerned about Apple’s ability to innovate in the future. The company has had success in the past with new products like the iPad apple watch but it remains to be seen if it can continue to come up with new hits.
Competition from Android
In the past few years, Android has made significant inroads in the smartphone market, eating into Apple’s share. This poses a major threat to Apple’s future growth, as the demand for iPhones start to decline if Android continues to gain market share.
There are several reasons for pessimism about Apple’s stock price in the next 10 years. One is margin pressure. Apple’s gross margins have been declining in recent years, and there is no reason to expect that trend to reverse. Apple will be selling more lower-priced products (like the iPhone SE) and fewer high-priced products (like the iPhone X), which will put downward pressure on gross margins.
Another reason for pessimism is that Apple’s growth is slowing. iPhone sales have been flat or declining for the past few quarters, and there is no new major product category on the horizon that looks likely to generate blockbuster growth. apple watch and AirPods are both doing well, but they are small businesses compared to the iPhone.
Finally, many investors are worried about trade tensions between the US and China. Apple makes most of its products in China, and a trade war could make those products more expensive or difficult to sell in China, one of Apple’s most important markets.
It is impossible to say definitively how much Apple stock will be worth in 10 years. However, Apple has a strong track record of delivering value for shareholders, and has outperformed the market in the past. Given these factors, it is reasonable to expect that Apple will continue to generate shareholder value in the future.