Apple AAPL has been a must-own stock for the better part of the last 15 years, and the iPhone giant appears to be establishing itself as a strong buy and hold candidate for the coming decade as well.

Apple wowed Wall Street with its third quarter fiscal 2020 results at the end of July and it made a move that could make its stock even more enticing to a wider array of investors. And that’s just the start of it.

Pandemic Highlights Apple’s Growing Portfolio   

Apple’s quarterly results easily topped estimates, with sales up 11% and adjusted earnings up 18%. And iPhone revenue popped 2% to crush projections, despite the broader economic downturn and lockdowns that forced it to close many stores.

On top of that, Mac and iPad sales jumped 21% and 31%, respectively. The firm attributed some of this growth to the need for people to work remotely and connect during these uncertain times.

AAPL’s wearables unit, which includes its smartwatch and popular wireless headphones, jumped over 17%, while services climbed 15%. This growth helps showcase how vital expansion beyond the iPhone is for the company. Apple now has revenue streams coming from its massive App store, as well as its various subscription services such as Spotify SPOT competitor Apple Music, its streaming TV service, news offering, video gaming, and more.

In fact, Apple’s paid subscriptions grew by more than 35 million sequentially to reach over 550 million across its various services, up 130 million from the year-ago period. And executives said on its earnings call that they remain confident Apple will hit its increased target of 600 million paid subscriptions before the end of the 2020 calendar year. Apple also grew its revenue across all of its geographic segments.

 

 

 

 

 

 

 

 

 

 

 

 

What Else…

The ability for a high-end consumer tech firm to lift its sales by 11% to a whopping $60 billion in the heart of a global pandemic and economic crisis might be all some investors need to know.

Alongside being the world’s most valuable brand, above Disney DIS, Nike NKE, and its fellow tech titans Microsoft  MSFT, Facebook FB, Amazon AMZN, and Google GOOGL, Apple closed the quarter with $81 billion in net cash.

The company also returned over $21 billion to shareholders via dividends and buybacks—in Q2 it raised its dividend by 6% and authorized a $50 billion increase to its repurchase program. AAPL’s dividend yield rests at 0.72% right now, to come in above the 10-year U.S. Treasury note’s 0.54%.

The income is an added bonus for a company that’s still expanding its portfolio, which includes bringing more of its chips in-house. The move is projected to help cut costs and improve battery life and performance.

Apple shares have surged 130% in the last year and roughly 20% in the last week alone. This came after the firm released its Q3 results on July 30. On top of that, Apple announced a 4-for-1 stock split that begins at the end of August. The cosmetic move, which Apple has made before, should help make its shares more attractive and attainable to a wider array of investors.

The split appears to have already paid off, as investors dive into AAPL in anticipation of increased demand, especially from the influx of retail investors. Aside from being a strong stock, Apple might be even more appealing if it trades for under $150 per share—AAPL hit new highs of $455 on Thursday and it could keep climbing—when investors consider that one share of Amazon costs $3,225, with GOOGL at $1,504.

Along with its soon to be cheaper price tag, Apple trades at a solid discount against some of its peers, even though all of their valuation are a bit stretched at the moment. AAPL trades at 6.3X forward 12-month sales, compared to Microsoft’s 10.3X and Netflix’s NFLX 8.1X—meanwhile, stay-at-home standout Zoom ZM trades at 38.3X. 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outlook

The pandemic has forced Apple to push back the release of its next-generation iPhone by a “few weeks.” This will likely see it launch in October and not late September, which should help boost its Q1 fiscal 2021 sales and hinder its fourth quarter results.

Luckily, Apple’s continued expansion and success of its services and wearables divisions help make up for the seasonality of its flagship smartphone. With this in mind, our current Zacks estimates call for Apple’s adjusted Q4 earnings to dip 9.9% on 3% lower revenue. Nonetheless, Apple’s FY20 EPS figure is projected to climb 9% on 5% stronger sales.

Peeking further ahead, Apple’s fiscal 2021 revenue is projected to soar 15% above our current-year estimate to hit $313.02 billion, with its adjusted earnings expected to come in 24% higher. Investors can also see that Apple’s longer-term earnings revision have climbed recently to help it earn a Zacks Rank #1 (Strong Buy) at the moment.

Bottom Line

Like it or not, people are addicted to their phones and consumer tech. This trend is unlikely to reverse course. And Apple is set to sell some of the most expensive smartphones and devices, as well as many of the various offerings and services people use on a daily basis. Plus, it’s ready to make more of the internal components.

Let’s also not forget that Apple pays a dividend, buys back a ton of stock, and has loads of cash that will help it venture into whatever new areas might be next.

Investors must remain diligent, and buy and hold forever doesn’t mean buy and forget. But Apple appears to be a solid candidate to buy and hold tight, even at its new highs. Others might want to wait for its stock price to become far less expensive at the end of the month.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

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