When a decade ago PetroChina hit the magic number of $1 trillion, management and shareholders raved. However, the celebration was short-lived. Unfavorable market conditions sent the stock into a free fall in the following months. In the past ten years, the company has not been able to recover from this fall.
However, Apple is not PetroChina. It is from a different sector, has its basics right and enjoys an immense brand loyalty, perhaps the highest in the world. These three reasons will make Thursday’s milestone an insignificant event in Apple’s long-term rally.
The iPhone maker’s biggest credibility arguably comes from the fact that it is one of those rare tech firms that managed to convince Warrant Buffett, who became at least $2.6 billion richer upon the tech giant’s 6% rally on Thursday.
Of course, growth is likely to slow due to the gargantuan size of the company and also because iPhone sales are reaching a threshold in the core markets. But Tim Cook has his focus right on all the growth areas – Artifical intelligence, VR and AR.
Separately, the company has displayed a stunning ability to transition itself fluidly according to consumer demands, much like how it shifted its core focus from computers to consumer electronics in the first decade of the twenty-first century.
Apple is currently foraying into original content production and autonomous driving as well in search of greener pastures. Once any one clicks, Apple will have a new business to drive its growth saga. The tech giant is not making any mistakes here – Cook has the best men under his umbrella.
But leave aside new businesses, Apple’s present businesses are quite strong by themselves. Despite slow sales, Apple has retained margins, thanks to a jump in average selling price triggered by iPhone X. Meanwhile, services revenue has been growing steadily towards Cook’s target of doubling the current revenue by 2020. In the most recent quarter, Apple’s Other Products sales jumped 30%, riding on a mid-40% growth in Apple Watch.
Unlike some of its rivals, Apple has never strayed too much away from its fundamentals. It’s PE ratio has been steadily maintained at low levels, unlike Amazon (AMZN), which flaunts outlandish PE ratios.
The sole threat at the moment seems to be coming from the trade spat between the US and China. However, the positivity around the stock and the brand loyalty is likely to play guard against this threat as well in the long-term.
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