My First Stock: Apple




Apple Inc. (NASDAQ: AAPL) my first stock investment. I read a lot about technology and very much is written about Apple in the media. Their business model is very simple and easy to understand and I feel comfortable with being a shareholder in the company. I bought AAPL when the shares stood at about $74, I thought that Apple was undervalued especially relative to the potential growth opportunities. The stock has risen substantially since then and today are shares at $112, which is a gain of +50% (I know what you think 'lucky bastard'). The stock were previously at $119 and I think it has good potential to rise above $125 in 2015. Additionally, Apple has a dividend of 1.68% today (2015-01-08), which will probably increase in the future because of their large capital. As you can see in the picture below, the majority of Apple's revenue is coming from the sales of iPhones. It may feel unstable that the iPhone represents such a large portion of the revenue but with new services and products in the future, I believe that the revenues will be distributed more evenly. Apple recently released Apple Watch and Apple Pay and I believe both will become successes. In addition, Apple acquired the company Beats (Beats Music & Beats Electronics) in March 2014. I think that Beats Music will be integrated into iTunes in 2015 and streamed music is something that will continue to grow.



Apple makes entrance on a huge growth market with Apple Watch, namely wearables. Wall Street believe that Apple will sell between 10-20 million  smartwatches  in 2015. Morgan Stanley, however, believe that Apple will sell nearly 30 million (the motivation is that 10% of those who own an iPhone 5 or later model will buy an Apple Watch). No matter how many watches they sell the first year, the market for smart watches will be huge and in the beginning I think Apple Watch will capture the majority of the market. In the picture below you can see an estimation from Business Insider of "Global Wearable Device Unit Shipments".


Apple is the world's largest company and is also considered to have the world's strongest brand. Apple has a tremendous brand loyalty and they have it for a reason. They have presented many great products and continues to release new and high-quality products. Most people only see Apple as a hardware company that manufactures electronics, but you should not forget the software in their ecosystem, OS X and iOS (there are also iTunes and App Store). It’s the entire Apple ecosystem which I think creates an advantage over other electronic companies. The clean design and simple functionality available in the product hardware and software system cannot be found anywhere else. However, Apple's products are not cheap but I think because of their strong ecosystem people are willing to pay because they know that the quality is high and the products are easy to use.


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Who is Apple's biggest competitor? Most of you probably start thinking about the South Korean company Samsung as Apple's biggest competitor. It’s obvious that iPhones and Samsung Galaxy mobiles often get compared in the media. But you should be aware that Samsung only makes the hardware while the phone is powered by the Android operating system owned by Google (NASDAQ: GOOG). I think that this is the biggest weakness of Samsung and other mobile manufacturers. Google can probably become a strong competitor to Apple in the future. Because they make the hardware and software they can create a better integration and connection between their services and products which can create a strong ecosystem. Tim Cook has said that he sees Google as their biggest rival, not Samsung. The competition is obvious in Apple's operating system iOS where YouTube (which Google owns) was removed as a default app and Google Maps was replaced by Apple's own app. And the weather and stock app is provided by Yahoo in iOS, this shows that Apple don’t want to ba dependent of Google. Before Apple went into the mobile market was Microsoft (NASDAQ: MSFT) with Windows the biggest competitor to the company. There is still a conflict between Mac and Windows users. It has become the same when it comes to iOS and Android users, it's almost like two different religions that have completely different opinions. Microsoft is still a competitor to Apple but in my eyes I don’t see a bright future for the company. There have also been a newcomer to the mobile market from Asia; Xiaomi which now is the world's third biggest smartphone maker after Samsung and Apple. Xiaomi has been criticized in the media for copying Apple, it might be good to keep an eye on Xiaomi in the future.


Over the past few years, PC sales have dropped,  surely because many people buy a tablet instead. Apple has dominated the tablet market  and still do with the iPad. Something remarkable is that Mac sales are still increasing while PC sales are declining. I think Apple is right to focus on premium customers. The products may be expensive but we have a fast-growing middle class (especially in Asia)  so more and more people will be able to afford Apple products in the future. In the Western world, Apple has already a large part of the market but a small part of South America and Asia, this gives Apple a huge growth potential. If nothing drastic happens regarding Apple's business model, I will always own Apple.

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