Approaching one trillion in market capitalization, Apple Inc. (Apple Stock Quote, Chart, News: NASDAQ:AAPL) is the giant of a stock and company that has ironically been getting a lot of bad press as of late for its lack of innovation.
Chalk it up to becoming a mature corporation, says Jamie Murray of the Murray Wealth Group, who argues that the company is still tops where it counts: in making tonnes of money on its products and services.
Much has been written in recent months about how Apple has been failing to capture consumer interest and imagination with new technology offerings. Critics claim that the creators of the Mac, the iPod and the iPhone are no longer at the vanguard of innovation and are currently flirting with danger by relying too heavily on iPhone revenues to keep the company in the black.
But with a glowing earnings report last week and a stock that today hit a record high, those concerns seem less relevant now than they did only a few short days ago. No wonder, says Murray, Head of Research at Murray Wealth, who claims that Apple Services revenue — including its App Stores, AppleCare, Apple Music, Apple Pay and iTunes — is where the company’s growth will be coming from going forward.
“There hasn’t been too much innovation with Apple. We know that they have their hands in augmented reality and they’re looking at expanding the applications that you can use the Apple Watch for,” Murray told BNN Bloomberg. “[But] the services businesses is the really exciting part for Apple, in terms of the investment story.”
“Nine billion in revenue this past quarter and [they’re] trending towards that $45 or $50-billion goal by 2020, although they’ll probably hit it sooner. That’s important because that service revenue has a very high margin. If you were to put a market multiple that other similar companies that are approximately that service has paid, you’re probably looking at a business that’s worth $150 billion,” he says.
Shares of Apple went above the US $185 mark for the first time in its history, putting the stock up almost ten per cent for the year and up 25 per cent over the past 12 months. Reportedly, investors have been reacting to news that over the first quarter of 2018 holding company Berkshire Hathaway had bought 75 million more shares of Apple — worth over US$11 billion —- making it Apple’s third-largest investor. Berkshire CEO Warren Buffett has come out to say that he’d own”100 per cent of [Apple]” if he could.
“We like very much the economics of their activities,” says Buffett. “We like very much the management and the way they think.”
Murray says investors anxious for the next quantum leap in technology need to remember that such advances are rare and that even Apple founder and tech guru Steve Jobs had his share of ups and down in terms of creative development.
“Steve Jobs is obviously a legendary innovator and investor, but it’s not easy to make these products, obviously,” he says. “I mean, there were some failures along the way.”