Apple is one of the most profitable and successful companies in the history of the world. While Apple has been in business for more than 40 years, it has seen a dramatic increase in value ever since the mid-2000s when it started selling the iPhone. In that time, the price of Apple stock, when accounting for splits, has gone up more than 2,000%. This has made it one of the most successful investments available and there is plenty of reason for future optimism as well. There are several reasons why Apple stock could continue to appreciate in value.
Continued Profitability and Cash Build
While many tech stocks have continued to do well out of anticipation for future growth, Apple has continued to do well with investors because of basic investment fundamentals. Over the past 12 months ending 6/30/18, Apple had earned more than $250 billion in revenue while making a gross profit of more than $100 million and net income of more than $55 million. This has helped to make them one of the most profitable companies of all time. In fact, the company has more than $115 billion in current assets, which can be used to distribute cash or make other investments.
Dedicated User Base
One of the hardest things that a company has to do is develop a dedicated user base. While this is very hard to do, Apple has successfully accomplished this. Today, there are more than 85 million iPhone users across the globe and the number is continuing to grow. Due to the way that service is structured with data plans, it is also much harder for customers to switch away from smartphones that it is for other products. There are also more than 1 billion Apple devices, including phones, tablets, and computers, that are in use with customers today. As customers continue to return due to innovation and product quality, the share price will only continue to increase.
Expanded Product Lines
Due to the amount of cash that the company has on its balance sheet and the dedicated user base, they have more flexibility to enter into new product areas than other companies. Today, there are many different product areas and service lines that Apple is considering getting into. Some of these will allow them to be more innovative and enter markets that provide even more room for growth. This development and innovation will help them continue to be more profitable going forward as well.
Another factor that currently has a lot of people excited about Apple stock is the proposed buyback of shares. Over the past few years, Apple has continued to develop a plan that would allow it to buy back millions of shares of Apple stock. Doing this will take available stocks out of the marketplace, which will then make current stocks more valuable due to supply and demand. Because of this, options animal and stock investors will see the price increase.
Evidence of Market for Pricier Products
During the past few years, it has also become clear that there is a continued growing market of people that are willing to pay more for more expensive phones. While the basic iPhone used to start out at less than $500, there are now options that are well in excess of $1,000. While some people thought that there was a lot of risk involved with selling the more expensive models, pricey phones have continued to sell very well and are helping Apple turn a larger profit. Apple will continue to focus on creating new tech and features that will cost more, but will yield higher margins due to the bigger prices.
When you are looking to build a stock portfolio, including Apple would be a great option. However, you need to remember to diversify your investments across different stocks, industries, and asset types. This will protect you if Apple stock happens to go against you.Comments »