Stock of the Week: Apple

We’re raising our fair value as sales hit new highs – but investors need to put it in perspective

Andrew Willis 25 May, 2021 | 4:28AM
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Andrew Willis: One of the world’s best-selling consumer products just sold a lot more… Apple (AAPL)’s iPhone revenue grew 66% year-over-year last quarter and sales are up over 88% in China. But we’re not sure this pace of growth will last…

A lot of the sales from the iPhone 12 launch delay were captured this quarter. And if we’re doing a year-over-year comparison with the depths of March 2020 for the rest of the company’s segments, the bar’s going to be set pretty low.

Sector Strategist Abhinav Davuluri does anticipate strong double-digit sales growth in 2021 but he expects those growth rates to moderate thereafter. And he attributes the growth in China primarily to sales of the new iPhone – – which could be in some trouble soon due to supply constraints.

This microchip shortage we’ve been hearing about lately, and other issues with hardware supply chains, are expected to take a toll on sales to the tune of 3 to 4 billion U.S. dollars. You need to watch for that next quarter.

Meanwhile, the company will lean on impressive growth in the software business that can support the next iPhone launch. Apple now has over 660 million paid users, up almost 25% since last year, and we expect the company will focus on improving features, like privacy, to retain customers and strengthen the ecosystem around what we call the company’s ‘crown jewel’.

For Morningstar, I’m Andrew Willis. 

 

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Apple Inc145.85 USD1.69Rating

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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