- Apple is reopening its stores in Japan and the U.S. at a time when demand for its wearables and iPhone SE is surging.
- Products like AirPods Pro and iPhone SE saw relatively high sales in the first quarter despite lockdown measures.
- Apple’s assembly of wearables in Vietnam and its potential move to India are boosting investors’ optimism.
Apple (NASDAQ:AAPL) stock may see an extended uptrend as it begins to open its retail stores globally. This week, the firm will reopen its flagship stores in Tokyo and in the U.S.
Apple stock is up 10% in the last 30 days, outperforming Amazon, Netflix, Microsoft, and Alphabet.
The uptrend was triggered by an increase in demand for wearables and iPhone SE, a gradual reopening of its stores, and the distribution of manufacturing outside China.
Apple’s momentum is so strong that Evercore ISI believes it will be the first company to achieve a $2 trillion market cap.
The firm’s analyst Amit Daryanani pinpointed the growing dominance of Apple in the wearables and services industries.
Factor 1: Surging Wearables and iPhone SE Demand
Apple saw a decline in iPhone sales in 2019 as global smartphone sales plateaued.
In the fourth quarter of 2019, the company recorded $33.4 billion in iPhone sales. By comparison, in Q4 2018, the company generated $36.8 billion in iPhone sales.
Heading into the second half of 2020, Apple’s sales in the wearables and services sector may offset dropping revenues from mobile phones.
Despite strict lockdown measures across many countries, AirPods sales climbed in the first quarter of 2020.
Apple was once again the top wearables company with 29.3% share and 21.2 million units. While Apple Watch shipments declined due to difficulties in the supply chain, the strength of the Beats and Airpods lineup was more than enough to offset the negative growth.
The iPhone SE 2020, a smaller and cheaper version of the flagship mobile phone, is seeing explosive demand in key markets.
In 2016, when the first iPhone SE was released, demand for the phone overwhelmed its suppliers.
The iPhone SE beat sales expectations once again in April while stores across the U.S. and Japan remained shut.
Factor 2: Reopening of Stores in the U.S. and Japan
As stores open in key markets with strict safety measures like social distancing and regular temperature checks, Apple is anticipated to see higher sales of AirPods, iPhone SE, and Apple Watch.
Rapidly increasing sales of its wearables products and the gradual reopening of Apple stores in China, Japan, and the U.S. can further bolster the momentum of AAPL stock in the short to medium-term.
With a strong following in the U.S., China, and Japan, Apple became the most dominant mobile phone retailer as it overtook Samsung in February.
The unexpected release of the affordable iPhone SE ahead of the launch of 5G services worldwide may lead to increased demand for the flagship phone.
Factor 3: Distribution of Manufacturing Outside of China
Another positive factor that may fuel Apple’s uptrend is its declining dependence on China.
In recent weeks, countries like India have opened up to Apple distributing its products outside of China.
Some users have reportedly claimed that the newly sold AirPods Pro cases show they were assembled in Vietnam.
The distribution of manufacturing iPhones and AirPods by Apple outside of China reduces the vulnerability of the stock from affecting to growing geopolitical risks.
The relationship between the U.S. and China deteriorated since early May. It worsened in the past week as the U.S., U.K., Australia, and many other countries criticized Beijing’s handling of the Hong Kong security law.
If the U.S. and its allies move to impose additional restrictions on Huawei, there is always a risk that China may counter the sanctions by imposing its own on American companies in the region such as Apple and Tesla.
Apple is taking necessary steps to ensure the stability of its operations across all of its product lines. The relaunching of its offline stores only strengthens the company’s momentum heading into a new quarter.
Factor 4: Strong Financials And Repurchasing of Stocks
Through strong sales and a cash-first philosophy with minimal acquisitions, Apple publicly disclosed $83 billion in net cash. The firm’s cash reserve is estimated to reach $100 billion in the second quarter.
In April, Evercore ISI said Apple is expected to authorize $75 billion to $100 billion in buybacks.
Apple’s board of directors approved another $50 billion in share buybacks, following CFO Luca Maestri’s emphasis on the “great value” of the stock.
Apple’s robust financials, sustained repurchasing of stocks, its domination in the wearables sector, and decent demand for its flagship iPhone models could be the catalyst that makes Apple the first $2 trillion company in the world.
Disclaimer: This article represents the author’s opinion and should not be considered investment advice from CCN.com.
Last modified: March 4, 2021 5:11 PM