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the NASDAQ-100 Technology Sector The index comfortably outperformed the stock market’s returns as a whole in 2020. Apple (NASDAQ: AAPL) has been a big beneficiary of this surge, as the stock has gained over 80% despite declining smartphone sales.
Apple stock market performance, data by YCharts.
Apple’s other product lines and booming services business helped it grow 5.5% year-over-year revenue in fiscal 2020, despite a 3-year decline , 2% of iPhone revenue. In 2021, Apple could ignite the fire and deliver much better results than last year.
The company is poised to take full advantage of one of the biggest tech trends – 5G wireless technology -. But Apple has other tricks up its sleeve as well. In fact, a host of favorable tech trends could make Apple one of the best tech games of 2021. Let’s take a look.
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5G smartphone trend will be Apple’s biggest growth driver
Apple’s main supplier Murata Manufacturing estimates that at least 500 million 5G smartphones could be shipped this year, up from around 300 million units in 2020.
Apple is expected to capture a good chunk of this growing market in 2021. TrendForce expects the iPhone to account for 35% of 5G smartphone sales in 2021. It also estimates that Apple’s total smartphone shipments could increase to 229 million units out of about 199 million. units last year, a potential increase of 15%.
This bodes well for Apple, as the iPhone accounted for 50% of its revenue in fiscal 2020, which ended in September of last year. Analysts expect Apple’s revenue to grow 15% in fiscal 2021. The arrival of 5G smartphones will be a big catalyst for this growth, but there are other winds as well. favorable.
Sales of tablets and PCs will be another catalyst
Apple’s Mac and iPad sales increased in fiscal 2020. These two products produced 19% of Apple’s total sales. Their combined revenue grew 11.3% year-over-year and Apple is expected to maintain this momentum in 2021.
Manufacturers have struggled to meet end market demand in 2020 due to a shortage of components. So, don’t be surprised to see an increase in shipments of these devices this year. IDC estimates that shipments of desktops and laptops could increase by 1.4% in 2021. Sales of tablets could remain nearly equal to last year’s levels, according to another estimate.
Apple is the largest player in the tablet market, with an estimated share of over 56% at the end of 2020. It is looking to attract more customers in 2021 with a new, more affordable iPad, according to sources at the chain. supply. Apple is expected to price the new tablet at $ 299, which could help it take more share from its low-cost Android rivals.
Meanwhile, sales of Apple’s new MacBooks, powered by the M1 chip, are expected to ramp up this year. TrendForce estimates that MacBooks with M1 engines could increase their share of the laptop market to 7% by this summer, from 0.8% currently.
All of this indicates that the hardware products that generate around 70% of Apple’s sales – iPhone, iPad, and Mac – will continue to enjoy favorable demand in 2021.
The service sector has a trump card up its sleeve
Apple’s services business was in good shape last year, growing 16% from the previous year. It produced nearly 20% of Apple’s total revenue.
This year, the service industry can benefit from the introduction of Apple One: a smart move by the iPhone maker to bring various services together under one roof. For $ 15 per month, Apple One subscribers get access to Apple Music, Apple TV +, Apple Arcade, and 50GB of iCloud storage. Subscribing to these services separately would cost a subscriber $ 21 per month. Apple One also offers subscribers the option to add Apple News + and Apple Fitness + to the plan, along with 2TB of iCloud storage, for a monthly price of $ 30.
Apple is targeting several fast-growing areas with its bundle. For example, the mobile gaming market is likely to support the tremendous growth it experienced last year in 2021 and beyond. Apple One gives users access to over 100 games, which subscribers can enjoy without ads and without having to spend money on in-app purchases.
The personal cloud storage market is poised to grow at a compound annual growth rate (CAGR) of 24.6% through 2027, according to Allied Market Research. Apple Music, meanwhile, is expected to become the mainstay of Apple’s service business.
Overall, Apple has incorporated fast growing verticals into the Apple One subscription plan. This could play a key role in attracting more subscribers, giving the service industry a chance in 2021.
Why should you buy
Apple is on track to capitalize on the hardware and software aspects of its business in 2021. Analysts are forecasting 20% more profit growth this year. Apple could even exceed market expectations, thanks to overwhelming demand for the iPhone 12.
In short, Apple looks like a well-balanced tech stock that is expected to benefit from various trends ranging from 5G to cloud to mobile gaming, providing investors with a one-stop-shop to buy the rapidly growing markets.
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