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Apple's Valuation Is Driven by Services but Wearables Are Driving Its Topline
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Apple (AAPL - Free Report) is trading at a forward P/E multiple that has been propelled to its highest level in almost 10 years. This is due to the business evolving from hardware-focused to service-centric, creating more reliable high-margin revenues.
Services such as AppleCare, iCloud, and Apple Music combined with the recently released Apple TV+ and Apple Arcade. These most recent subscription offerings are driving a large portion of this stock’s growth this year, with long-term consistent subscription revenue being an attractive offering for investors.
Service revenue has been decelerating, and the firm’s illustrious AirPods have been taking center stage. It seems that 1 out every 3 people I see are wearing these small white pods, and that figure continues to grow.
The new AirPods Pro, released at the end of October, is Apple’s hottest holiday item. The Airpods Pro are being priced at the highest-end of the wireless headphone market, yet stores can’t keep them on the shelves. This product is a reflection of Apple’s original business strategy: selling quality hardware at a premium price.
Wearables grew over 40% this past fiscal year (ending in September), and services have decelerated to only 16%. Investors have been trading Apple shares up on the notion that its services are the future of the business, but its hardware is still driving the growth.
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This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
Apple's Valuation Is Driven by Services but Wearables Are Driving Its Topline
Apple (AAPL - Free Report) is trading at a forward P/E multiple that has been propelled to its highest level in almost 10 years. This is due to the business evolving from hardware-focused to service-centric, creating more reliable high-margin revenues.
Services such as AppleCare, iCloud, and Apple Music combined with the recently released Apple TV+ and Apple Arcade. These most recent subscription offerings are driving a large portion of this stock’s growth this year, with long-term consistent subscription revenue being an attractive offering for investors.
Service revenue has been decelerating, and the firm’s illustrious AirPods have been taking center stage. It seems that 1 out every 3 people I see are wearing these small white pods, and that figure continues to grow.
The new AirPods Pro, released at the end of October, is Apple’s hottest holiday item. The Airpods Pro are being priced at the highest-end of the wireless headphone market, yet stores can’t keep them on the shelves. This product is a reflection of Apple’s original business strategy: selling quality hardware at a premium price.
Wearables grew over 40% this past fiscal year (ending in September), and services have decelerated to only 16%. Investors have been trading Apple shares up on the notion that its services are the future of the business, but its hardware is still driving the growth.
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Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
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