To hear Wall Street tell it, the fact that Apple Inc. (Nasdaq: AAPL) just became the first U.S. firm to reach a $1 trillion market cap is “big news.”
I’m not so sure…
Please don’t think I’m being cynical. After all, I’m one of the biggest Apple bulls around.
Here’s the thing. While the $1 trillion valuation coming on the heels of a great earnings report is a key milestone for all tech investors, Apple’s historic status isn’t a surprise.
At least not to those who have been following along here…
See, back in April 2015, I predicted Apple would make this notable achievement.
And since then, it’s up 61%. That’s nearly double the S&P 500’s 33.4% return over the same period.
So, if you’ve been following along with my advice over the years, you’ve made a bundle here.
But that’s the past. Unless you were one of the savvy ones who bet on Apple, it doesn’t matter.
The question now is: Where’s Apple going from here?
A History of Getting It Right
For the record, Apple crossed the $1 trillion mark shortly before 11 a.m. Eastern yesterday, once shares of the globe’s most valuable public company climbed above $207.04.
To fully appreciate where I’m coming from, let’s put my predictions in context.
I was one of the first tech analysts to say that Apple shares would reach $1,000 – before its most recent stock split – back on Oct. 30, 2013.
I also made that call as a guest on Fox Business. As a sign of how far out there that was at that time, I thought host Stuart Varney was going to jump out of his chair when I made that forecast on live television.
The stock reached my $1,000 target price on March 28, 2017, on a split-adjusted basis when it hit $142.85.
For me, the prediction of a $1 trillion market I made more than three years ago made perfect financial sense. After all, the firm has been moving beyond its reliance on the iconic iPhone and ramping up sales of services like iTunes and its App Store.
As someone who’s followed Apple since the 1980s, I have seen just how successful the firm has been at cross-selling to its customer base.
Folks may start with an iPhone, but before long they are buying an Apple Watch, subscribing to iTunes, and adding iCloud accounts to store all the content they buy through Apple.
I’m not bringing all this up to brag – well, maybe just a little – but I want to note that I have never lost faith in Apple, even as many on Wall Street and in the financial media have said it was destined to decline.
An Investor’s Best Friend
Truth be told, Apple has become one of the more shareholder-friendly firms around – in tech or any other sector.
Since 2012, it has spent at least $234 billion on share buybacks and dividends. In that time, more than 1.4 billion shares, or more than 20% of all shares outstanding, have been retired through buybacks.
That’s like giving earnings per share an extra 20% boost, on top of the rate of growth in adjusted earnings.
Of course, when you post the kind of numbers Apple did in its most recent quarter, you have the kind of cash flow that mints money for shareholders.
Yes, it’s worth noting that demand for iPhones remains robust. That’s why – despite speculation to the contrary – Apple kept up its premium pricing during its fiscal third quarter, which is usually its weakest.
Sales of the company’s flagship product rose 20% to $29.91 billion, despite the fact that shipments rose less than 1% to 41.3 million units.
Not only that, but this was the seventh straight quarter of rising revenue, which came in at $53.27 billion, beating forecasts.
Where Apple’s Going From Here
Even better for the long haul, Apple keeps ramping up its services. The company has suggested that it may be able to generate as much as $50 billion in sales here in the next few years.
It’s well on the way to doing so. The services have become one of Apple’s biggest growth engines based on demand for subscriptions to iCloud storage, the streaming-music service, and offerings such as Netflix and HBO through iTunes and Apple TV.
Service sales in the quarter hit a record of $9.55 billion, a yearly increase of 31%. That means two things…
- Services are already on pace to hit $40 billion in sales as early as the end of next year.
- Apple is well on its way to becoming the kind of software firm that can move well beyond its iPhone/Mac hardware legacy.
With that in mind, I still see a quick 25% upside from here.
In other words, I’m standing by my early-2018 forecast that Apple will hit $250 a share in as little as two years. I actually think it will go well beyond that in the years to come, but I want to be conservative here.
But for investors in both firms – and I hope that includes you – it really didn’t matter who got there first.
What’s really important is what I have been saying for so many years now.
The road to wealth is paved by tech.
And if you have a savvy investing guide in your corner, you’ll get there much faster – and well ahead of when Wall Street thinks it can be done.
Sometimes, though, getting there first does matter.
Such as when a company is first to market with a revolutionary new technology.
A technology that we need to counter the new superweapons now being developed – and shoved in our faces – by Russia and China.
America isn’t taking these new threats lying down.
The Pentagon’s top minds are working overtime to invent our own superweapons.
But whatever they come up with, we expect they’ll need the company with 50-plus patents for what we’re calling Operation Hyper-X – the technology that will make those weapons possible.
It’s already piling up contract wins.
I’m predicting this company will stack up a 3,877% increase in revenue.
And you can bet the stock will follow that trajectory.
But the profit window is closing – fast.
This tiny defense tech firm won’t be “first” forever.
Cheers and good investing,
Michael A. Robinson