Written by Norman Isaac Mwambazi

Investing in Apple stock is as profitable as you can imagine

Apple Inc., trading on the Nasdaq stock exchange as AAPL, is currently the biggest company in the world with a …

Apple Inc., trading on the Nasdaq stock exchange as AAPL, is currently the biggest company in the world with a market capitalization of more than $2 trillion. Apple is one of the five Big Tech companies sometimes referred to as The Five Horsemen or the Big Five that include other tech giants Microsoft, Amazon, Alphabet (the parent company of search giant Google), and social networking giant Facebook.

Apple designs, manufactures, and sells smartphones through the famous iPhone line, personal computers, and laptops popular known as Macs, tablets (iPads), and wearables (Apple Watch), accessories (Beats headphones). Apple also develops and sells internet services like iCloud cloud service, digital content streaming services iTunes, Apple Music, and the recently launched Apple TV+.

Apple prides itself in setting the bar way too high in regards to the quality of its good and services, setting the trend in the production of high-end products and coming up with ingenious innovations that keep the consumers coming back for more every other year. All this, coupled with the company’s management, brand promotion and protection has propelled the company into being the largest in the world by market capitalisation.

Apple’s competition

However, being the biggest does not mean you do not have competitors. Almost all their products and services have competition from other big tech companies. South Korean tech giant Samsung is Apple’s fierce competitor through their high-end smartphones and tablets in the Galaxy range.

Apple’s Mac line of personal computers and laptops face competition from other big manufacturers like Dell Technologies Inc., Lenovo, and HP among others.

When it comes to digital content streaming which includes music, radio and podcasts, Apple’s Apple Music and iTunes face fierce competition from Spotify, Amazon Music, Tidal, among others.  

When it comes to cloud computing services, Apple’s iCloud is facing competition from Amazon Cloud, Microsoft’s Azure, and Alibaba Cloud from Chinese tech giant Alibaba among others.

Competition notwithstanding, Apple continues to grow and file profits after every quarter and for an investor that bought Apple stock, this translates into high dividends as well.

Apple’s latest developments

On October 13, 2020, Apple announced the latest instalment in their iPhone line of smartphones, the iPhone 12 in a video presentation. Coming in four versions namely iPhone 12, iPhone 12 Pro, iPhone 12 Pro Max and a new, smaller, iPhone 12 mini, the devices have been upgraded to 5G speeds, faster processing chips, and improved cameras. These high-end devices are for those with deep pockets, as the iPhone 12 Pro max starts at $1,099 but Apple’s loyal customers will be more than glad to pay that amount to get hold of the new device with a 6.7-inch screen.

The iPhone 12 joins a string of new devices that were released last month at an Apple event held at the Steve Jobs Theatre in Cupertino, California on September 15, 2020. These include the latest Apple Watches and the updated iPad Air among others.

Apple’s Financials

In Q3 of Apple’s Fiscal Year that ended on June 27, 2020, the company posted a net income of $11.3 billion and revenue of $59.7 billion, which showed a growth of 12% and 10.9% for net income and revenue respectively.

In the Q3 reports, Apple said that its products business, which made up to 78% of the company’s total revenue, grew by 9.8%. This was broken down as follows:

iPhones – 44% of total revenue

Macs – 12% of total revenue

iPads – 11% of total revenue

Wearables, Home and Accessories (Apple Watch, TV, Beats) – 11% of total revenue

Apple services, like iCloud, and Apple Music made up 22% of the company’s total revenue, also grew by 14.8%. Apple is putting more emphasis on its services business than products because the former is more predictable and has a recurring revenue stream than the latter.

This emphasis is backed by figures that indicate that the company’s services business grew in sales percentage from 64.1% a year ago to 67.2% in Q3 this year. This is in contrast to a slight decline in the products business, which dropped from 30.4% a year ago to 29.7% in Q3 FY 2020.

Apple’s business segments

Apple is a multinational technology company that serves its products to the entire world. The company is headquartered in Cupertino, California but it has divided its business operations into segments to serve different markets.

The company’s dominant market is the U.S., which falls in the “Americas segment” that includes both the North and South America. Apple generated $27.0 billion in revenue from the Americas in Q3 FY 2020, which is a 7.8% growth. This makes up about 45% of the company’s total revenue. In the same period, the company’s operating income in the Americas rose to $8.0 billion, reflecting a growth of 7.1%.

Europe

The second segment of Apple’s business is Europe, which includes all European countries, India, the Middle East, and Africa. In this market, Apple’s revenue in Q3 FY 2020 was $14.2 billion, a growth of 18.9% operating with $4.4 billion, which also grew by 19.9%.

Greater China

Greater China, according to Apple’s business segment, includes China, Hong Kong, and Taiwan. Revenue in this segment grew by 1.9% to $9.3 billion, which is about 16% of the company’s total revenue. Operating income also grew by 6.0% to $3.4 billion.

Japan

In Japan, Apple generated $5.0 billion in revenue, which was a growth of 21.7% in Q3 FY 2020 operating with an income of $2.1 billion, also a 17.8% growth. Japan’s revenue from Apple’s business operations is 8% of the company’s total revenue.

Rest of Asia Pacific

Australia and other Asian countries that are not included in the company’s other segments fall here. This segment posted $4.2 billion in revenue during Q3 FY 2020, a 17.0% growth operating with $1.4 billion. This revenue makes up 7% of Apple’s total revenue.

From the above figures, it is evident that the Asian market is more valuable to Apple than Europe, almost doubling it in both revenue and operating income.

Apple shareholders

Apple Inc. became a publicly-traded company on December 12, 1980, for $22.00 per share. By the time of filing this article, each Apple share is priced at $121.13. Here are the top three individual shareholders of Apple.

Arthur Levinson

Arthur Levinson is the current Chairman of Apple Inc. holding that position since 2011, and it is only fair that he owns the most shares of the company, individually with 1,133,283 shares. Levinson’s shares represent 0.03% of all outstanding shares of Apple Inc.

Tim Cook

Current Chief Executive Officer (CEO) of Apple Tim Cook comes in second with 847,969 shares of Apple stock, which represents 0.02% of all outstanding shares. Cook has been Apple’s CEO since 2011 after the death of co-founder Steve Jobs.

Al Gore

Former Vice President of the United States Al Gore owns the third most number of shares of Apple stock with 113,585. His shares represent less than 0.01% of all outstanding shares. Gore, himself a Nobel Prize laureate, is the co-founder and Chairman of investment firm Generation Investment Management. He is part of Apple’s board of directors.

Top three institutional shareholders of Apple

Apart from individuals owning shares in Apple, holding companies and investment funds also own stocks in this valuable tech giant. Here are the top three institutional shareholders.  

Vanguard Group Inc.

Vanguard Group is the biggest shareholder of Apple, owning a staggering 336.7 million shares. This is 7.8% of the total shares outstanding, as of March 31, 2020. Vanguard Group boasts of about $6.2 trillion in global assets under management, and Apple is the second-largest holding in their vast portfolio.

BlackRock Inc.

BlackRock comes in second with 274.7 million shares of Apple stock. This represents 6.3% of total shares outstanding as of March 31, 2020. Apple is BlackRock’s second-largest holding, comprising 6.0% of their $7.4 trillion portfolio.

Berkshire Hathaway Inc.

Led by billionaire investor Warren Buffett, Berkshire Hathaway is the institution with the third-highest number of Apple shares, owning 245.2 million of them. This is 5.7% of total Apple shares outstanding as of March 31, 2020.

Companies owned by Apple

Big companies are known to acquire other companies either wholly or partly for different reasons some of which include buying off competition or getting access to their software and hardware components. Apple is no different, and you would expect a company of its size to acquire others. Here are the companies owned by Apple Inc.

Beats by Dre headphones
Beats headphones
CompanyType of businessAcquisition priceDate purchased
Dark SkyWeather appMar 31, 2020Undisclosed
NextVRVirtual Reality streaming serviceMay 14, 2020$100 million
Beats Electronics and Beats Music  Audio productsAugust 1, 2014$3 billion
Siri Inc.  Voice-activated personal assistant technologyApril 28, 2010Estimated to be more than $200 million
Shazam  Music identifier app  September 24, 2018Estimated to be $400 million
NeXT Software  Hardware and software developer  December 20, 1996$400 million
AuthenTec  Computer security and touch control software$356 millionJuly 27, 2012

For all these companies acquired, Apple has incorporated its software into Apple products like the iPhone, iPad, Mac computers, Apple Watch among others.

Apple’s stock profitability

As the largest company in the world by market capitalisation, Apple’s stock is expensive, and rightly so, but it is immensely profitable, investment in which guarantees you a return on your investment.