Apple is famous for its innovation, revolutionary culture, and juggernaut-like stock performance of the 2000s. Prior to the Great Recession, Apple was the the focal point of Wall Street’s craze, and continues to be one of the most actively traded equities on the Nasdaq. The Silicon Valley pioneer repeatedly beat earnings quarter after quarter, and profits continued to accelerate in growth.
In 2016 we have observed Apple’s marketshare peak and quarterly profits decline for the first time in the company’s 30 year history. It is now obvious that the once high-growth Apple of 2001-2008 is no longer, replaced by a more mature, dependable investment that millenials will likely depend upon while planning for retirement.
Apple will never experience rapidly accelerating growth in the future because its marketshare has solidified, and will be relatively unchanged in the foreseeable future. Considering the iPhone accounts for nearly 70% of Apple’s revenues (Statista), let us examine this product as the backbone of Apple’s business. Apple currently owns just 15% of the worldwide smartphone market, a figure that has stagnated in recent months. Perhaps this number will advance slightly with the recent release of the iPhone 7 and 7 Plus, but expect Apple’s marketshare to remain unchanged as its smartphones remain somewhat comparable to the Samsung Galaxy lineup.
The iPhone 7 is analogous to Apple’s corporate strategy, as well as stock behavior from here on: The iPhone 7 is a marginally improved smartphone that gives iPhone 6S & earlier owners an excuse to spend $300+ on a newer version of what they already own. This includes myself. People are willing to pay a few hundred dollars because while the new iPhone might not be groundbreaking, it is marginally better at everything. Battery life? Over an hour longer. Performance? Apple’s new A10 Fusion chip is twice as fast as the A8 found in the iPhone 6. And if your brother decides to shove you into a pool without warning? Added water resistance means your phone will live to see another day. Apple did not reinvent the phone with its latest release, but it gave its user base enough of a reason to revisit Apple’s sleek stores and renew their loyalty to their beloved brand.
Thanks to these annual updates, Apple loses just 7% of its iPhone users to other smartphone providers on a yearly basis, a number easily made up for with new models that gradually convert a small portion of the competition. Samsung tells a different story. The Korean tech giant loses 35% of its user base, and 10% of its users plan on converting to an iPhone. Apple’s solid market share position, as well as its consistently (while marginally) improving product lineup will mean steady returns for investors. The stock has transitioned from a rapid-growth to a sustainable-growth phase, and could be a backbone for a young person’s diversified long-term equity portfolio.