Is Apple Inc. (NASDAQ:AAPL) Still A Good Long-Term Investment?

December 06, 2017, 13:04 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Apple Inc. (NASDAQ:AAPL) recently announced its fourth quarter results where revenues and earnings per share beat expectations. Several things stand out from this earnings report key among them being that earnings per share, overall revenues, and services revenues hit new all-time highs.

Article Summary

Apple’s fourth quarter results beat estimates in terms of revenues and EPS.

The company launched the iPhone 8 and X, which are quite popular.

Apple’s services division is growing and will be crucial to the company’s future.

Here’s the trading report on AAPL.

It is evident from the latest earnings report that Apple services division is playing a crucial role in generating revenues for the company, which implies that this segment shall continue playing a critical role in the company’s future. IPhone sales continue to be the company’s main revenue generator and with the launch of the iPhone 8/ 8 Plus/ X, the popular smartphone is well positioned to continue leading the premium smartphone market.

The growing importance of Apple’s services division should not be underestimated given that it contributes a significant percentage of all revenues that are not related to iPhone sales. IPhone sales generate about two thirds of Apple’s gross profits, while the services division has grown from contributing about a third of the extra profits in 2014, to contributing at least two-thirds of the additional profits in 2017.

Opinion is divided among analysts as to whether Apple has room for more growth, or whether the company has peaked. The bullish group of analysts believes that Apple stock will rally above $200 per share in 2018, while the bear camp believes that Apple will start reporting lower profits and margins as it starts decelerating.

Given that the company has demonstrated a knack for staying on the cutting edge of technology and designing phones with features that appeal to its loyal followers, I am inclined to support the bullish camp. Apple has consistently improved its iPhone models as evidenced by the use of OLED screens in the latest iPhones as well as the inclusion of augmented reality (AR) capabilities in the same models.

Apple’s innovativeness is what leads me to believe that the company’s premium smartphones shall remain relevant and in demand for the foreseeable future. The company’s services division will also play a critical role in generating profits for Apple in future given that the division has higher margins as compared to device sales.

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