The latest news shows that Apple’s market value has almost doubled in the past year. In fact, Apple’s share price has been lower than the market level before because investors in apple are worried about the lack of innovation in its products. But this is the first time since 2011 that Apple’s P / E ratio has been consistently higher than the S & P 500 index for several consecutive months, contrary to the situation in the past nine years. With a market value of more than 1.3 trillion, will Apple’s future lie in smart wearable devices?
The main reason for this change is that Apple has built an ecosystem with nearly 1.5 billion users over the years, and can generate a very stable profit stream. In addition, industry insiders also said that icloud storage, Apple Music and other services contribute more and more, and Apple’s business is more stable, so it is reasonable to obtain such a high market value this time.
According to analysts’ estimates, Apple’s revenue is expected to increase every quarter in the next three years. The company’s profit is expected to grow by 10% in fy2020 and maintain that growth rate over the next two years. Although Apple’s earnings fell for two consecutive quarters last year, investors are still willing to pay high prices for Apple’s stock, one of the reasons is that apple is expected to achieve stable growth. The stock rose 86% in 2019 and is trading at a price to earnings ratio of 25, its highest level since 2008. By contrast, the standard & Poor’s 500 index has a P / E ratio of 21.7.
Although Apple has not been able to become number one, as more and more investors accept Apple’s expansion beyond smart phones, Apple’s P / E ratio will maintain a rising trend. One reason is that Apple’s huge user base provides a similar source of recurrent revenue.
Although Apple currently relies on the iPhone for at least half of its revenue, the iPhone’s share of revenue has been declining in recent years due to the slowdown in smartphone sales. In addition to mainstream app stores and AppleCare subscriptions, the company also launched TV + streaming services and arcade video game subscription services. The market expects service revenue to grow to $54 billion by fiscal year 2020, accounting for a fifth of the company’s total sales, up from 18% at the end of 2019.
In addition, Apple’s wearable devices have become a major pillar of Apple’s revenue, especially airpods. Recently, the airpods Pro was out of stock on Black Friday. Plus Apple watch, Apple’s success in these projects has also made investors more willing to pay for Apple shares.
Where is the future of apple? Will it be on wearable devices?