Apple Inc. (NASDAQ:AAPL) is one of the most valuable companies in the world, with a market capitalization of over $2.5 trillion. But according to Gene Munster, co-founder of Loup Ventures and a longtime Apple analyst, the tech giant still has room to grow.
Munster believes that Apple's iPhone business, which accounts for about half of its revenue, is poised for a strong performance in the next few years. He cites several factors that could drive iPhone sales higher, such as:
The 5G upgrade cycle: Munster expects that the iPhone 12 and iPhone 13 models, which support 5G networks, will spur a multiyear upgrade cycle among consumers who want faster and more reliable connectivity. He also anticipates that 5G coverage and performance will improve over time, making the new iPhones more attractive.
The pricing leverage: Munster notes that Apple has increased the price of its entry-level iPhone SE by 8% from the previous generation, which shows that the company has pricing power in the smartphone market. He also points out that Apple has a loyal customer base that is willing to pay a premium for its products and services.
The digital transformation: Munster argues that Apple is the cornerstone of the digital transformation that has been accelerated by the COVID-19 pandemic. He says that Apple's blend of hardware, software, and services is unmatched by its competitors in terms of reach and popularity. He adds that Apple's Mac and iPad segments have seen strong growth in 2020 and 2021 as more people work and learn remotely.
Munster predicts that Apple's stock price will reach $200 per share in the next couple of years, which would imply a market cap of $3 trillion. He also thinks that Apple will benefit from rumors and anticipation of new business segments, such as expanded hardware subscription offerings or augmented reality devices.
Apple's stock price has risen by about 30% year-to-date, outperforming the S&P 500 index. The company reported record revenue and earnings for its fiscal fourth quarter of 2021, driven by strong demand for its products and services across all regions and categories.
Apple's impressive performance in the September quarter was driven by strong demand for its products and services across all regions and categories. The company reported double-digit growth in all of its geographic segments, with Greater China leading the way with a 45% year-over-year increase in revenue. The company also saw double-digit growth in all of its product categories, with iPhone revenue up 47%, Mac revenue up 16%, iPad revenue up 21%, Wearables, Home and Accessories revenue up 11%, and Services revenue up 25%.
Apple's Services segment, which includes offerings such as Apple Music, Apple TV+, iCloud, Apple Arcade, Apple Pay, and AppleCare, reached a new all-time high of $18.3 billion in revenue in the September quarter. The segment has been a key driver of Apple's growth and profitability in recent years, as it provides recurring and high-margin revenue streams from Apple's large and loyal customer base. Apple reported that it had over 745 million paid subscriptions across its services at the end of the quarter, up 160 million from a year ago.
Looking ahead, Apple expects to face some headwinds in the December quarter due to supply chain constraints and component shortages that could limit its ability to meet customer demand. The company did not provide specific guidance for the quarter, but said that it expects revenue to grow year over year but at a lower rate than in the September quarter. The company also expects gross margin to be between 41% and 42%, operating expenses to be between $11.6 billion and $11.8 billion, and other income/(expense) to be $300 million. ec8f644aee