Summary:
- Tech selloffs may continue
- Sales on iPhone 8 may pleasantly surprise many investors.
- Services Segment is indicative of long-term growth
While many question the true value of Apple, and aim to predict the best time to purchase shares, there are a few indicators that investors must take note of.
If I could avoid a single stock, it would be the hottest stock, in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train — and succumbing to the social pressure often buys.”
~Peter Lynch
By Peter Lynch’s theory, current investors should run far from Apple stocks, or should have purchased shares when they were still cheap and relatively unknown. It’s good to note that although price should be a factor when selecting a specific equity, it should never be the deciding factor if the company shows potential.
Depending on the company and their core offerings, sometimes the best time to buy a stock is when the company has become somewhat boring. This is because boring companies generate less hype, and tend to be less inflated by over-optimistic investors. Unfortunately, with the plethora of headlines that it makes, Apple won’t be anywhere near boring in the near future. So this begs the question of when one should enter or increase their position in Apple.
A Market Pullback
In order to consistently come out on top, good research on not only the company, but market as well, is paramount. No matter if you’re predicting a rise or decline in share value, understanding the reasons behind them is as critical as them actually happening. However, simply assuming that the recent drops in the Nasdaq and “tech selloff” will continue are not great indicators of whether or not an investor should hold, sell, or even buy. Although market declines are generally seen as dangerous indicators that will surely contribute to short-term price declines, it fails to display true value in the long-term.
As people have gotten wary of the over-crowded tech sector, position sell-offs have spurred temporary declines in prices. However, as the sell-off won’t last forever, this could be a potential opening for investors to enter or increase their positions on Apple shares.
As a result of this tech sell off, which Bob Doll of Nuveen Asset Management has said was long overdue, Energy and Financial related stocks have enjoyed a small influx. Although there’s no one that can truly predict when events will fluctuate the market up or down, Apple may be a prospective company to watch in the coming months.
Will iPhone 8 Live Up To Expectations?
After losing out to Samsung as the leader in smartphone sales, analysts forecast that the iPhone 8 will be the release that will return Apple to its former glory. Specifically, Angela Zino, a CFRA analyst, believes that apple will sell 241.5 million units, which far surpasses the previous sales record of 231.22 million held by the iPhone 6. However, until the product is released later this year, and sales figures start rolling in, Apple’s current share movements are very speculation and leak sensitive.
As the iPhone 8 launch date looms closer, it’s expected that the sales of current iPhones will drastically decline. As such, revenue figures, and as a result, Earnings Per Share, won’t look nearly as good as management would like. Although the iPhone 8 sales predictions are still very optimistic, drastically new innovations in the new flagship product could potentially sway more interest than people give credit for. For example, the features on the iPhone 7 may not have been a large enough upgrade from that of the iPhone 6, which could have deterred many potential buyers. However, Apple would be able to capture a large upgrading market if the iPhone 8 turns out to be as good as anticipated.
Apple Services Over Shadow Amazon
A revenue segment that many consumer tend to overlook is Apple’s legion of services that include familiar services such as: Apple Music, iCloud, iTunes, App Store, Apple Pay and much more. With the highest revenue ever recorded in a 13-week cycle, Apple’s services grossed over $7 billion just last quarter. To put into perspective, Amazon Web Services is already very respectable in its own right, but is nearly doubled by Apple services in terms of revenue (although Amazon is growing very quickly, and could compete with Apple in the future).
As their fastest growing sector by dollars ($1.05 billion), Apple Services recorded an 18% year over year increase, representing almost half of Apple’s total revenue growth last quarter. To contrast, iPhone sales only accounted for $392 million of growth.
However, not only have growth figures proven the potential in Apple’s service segment, but they have also been consistent, as this marks the second quarter in a row that revenue generated has surpassed $7 billion. These growth evaluations have fueled Apple’s plans to double their services unit by 2020. The combined consistency and growth potential in such a service segment should benefit Apple shareholders, as this is a sustainable, recurring revenue stream, and a way for Apple to innovate outside the densely competitive smartphone scene.
Additionally, Apple’s services also entice consumers to purchase their physical products, and expand into their other offerings. This encourages customer loyalty, and truly incorporates themselves into the daily needs that consumers demand.
Final Thoughts
Although Apple seems like a beneficial stock to buy and hold for future returns, there are a plethora of other undervalued stocks that investors could bet on. For many investors, they would have to wait and gauge the revenue estimates on the iPhone 8 and other product offerings before making a decision.
Featured Image: twitter
