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Apple (AAPL) Stock Is A Strong Buy Way Beyond the iPhone XS Max

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Apple (AAPL - Free Report) saw its stock price jump nearly 3% Thursday following the firm’s highly anticipated unveiling of its latest iPhones. But investors should look beyond the iPhone XS and the XS Max to Apple’s more diversified future to help them see why AAPL stock looks like a strong buy at the moment.

Launch Overview

Apple’s CEO Tim Cook and other executives showed off the tech giant’s latest offerings at its now-standard event to hype products ahead of the vital holiday shopping period. One year removed from the debut of Apple’s 10th anniversary iPhone X, the company introduced three new iPhones: the iPhone XR, the iPhone XS, and the iPhone XS Max.

The company boasted that all of the phones feature faster processors and longer-lasting batteries, among other new features. Apple’s extravaganza highlighted its push into bigger, more expensive phones as the company banks on its ability to continue to attract consumers at eye-popping price points—the iPhone XS Max is set to start at $1099 and could cost up to $1,449.

Overall, Apple’s three new iPhones have an average selling price of $949, which is roughly 15% higher than the three phones launched last year. It is these kind of high price points that helped see Apple’s most recent quarterly iPhone revenues surge 20% to $29.91 billion, while iPhone unit sales only saw a 1% jump.

Investors should also note that Macs and iPads were left out of Apple’s big release event where the firm also showed off its new Apple Watch Series 4. Macs were the products that helped bring the company to prominence decades ago, but it seems like some of Apple’s growth might no longer come from the firm's traditional devices.

Looking Ahead

Apple became the first publicly listed U.S. company to reach $1 trillion in market value largely on the back of its flagship consumer product that has only been around for roughly 11 years. But over the last year or so investors have become increasingly focused on Apple’s new growth areas beyond the iPhone.

At the forefront of this expansion is the aptly named Services unit. This business is comprised of AppleCare, Apple Pay, Apple Music, and other divisions, and saw its quarterly revenues soar 31% to $9.548 billion.

Apple Pay was used for more than 1 billion transactions, which tripled the amount in the year-ago quarter. Plus, Apple said that its payment platform completed more total transactions than Square (SQ - Free Report) and more mobile transactions than PayPal (PYPL - Free Report) . Meanwhile, Apple Music has grown in popularity rather quickly and is reportedly already close to surpassing Spotify (SPOT - Free Report) in the U.S. Apple’s CEO also said on its Q3 earnings call that it is on target to double its 2016 Services revenue by 2020—which would Services hit nearly $50 billion.

Apple’s less-talked-about “Other Products” unit, which includes AirPods, Apple TV, Apple Watch, Beats products, and HomePod, also climbed 37% to reach $3.74 billion. This made it the company’s fastest-growing unit for the fifth quarter in a row.

Lastly, Apple is ready to enter the streaming TV market at some point in the next few years. The tech giant has slowly amassed a ton of A-list Hollywood talent, both in front of and behind the camera, which should help it compete against Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) (also read: The Apple Story No One Is Talking About This Week).

 

Projections

Looking ahead, our current Zacks Consensus Estimate is calling for Apple’s Q4 revenues to climb by nearly 16% to hit $60.98 billion. Meanwhile, Apple is expected to see its adjusted quarterly earnings soar by 32.9% to reach $2.75 per share.

Apple has earned nine earnings estimate revisions for its fiscal fourth quarter over the last 60 days, with 100% agreement to the upside. The company has also received 10 full-year and 10 fiscal 2019 upward earnings revisions during this same stretch, against zero downward changes. This positive movement helps Apple earn its Zacks Rank #1 (Strong Buy).

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