After losing almost 30 percent of its value since reaching a record high in October, Apple's shares (NASDAQ: AAPL) have shown a strong rebound in the fiscal report for the first quarter of the quarter 2019 at the end of January .
After seeing a profit of about 10 percent since the report of the results, Apple bulls have found a renewed hope in this tech titan, which was one of the most defeated technological inventories of the last three months.
Apple (AAPL) – 1-month chart
Investors were encouraged to see that the company has a strong momentum in the other parts of the company that are positioned to compensate for declining iPhone sales, which still account for about 60% of total sales.
While sales of iPhones declined by 15 percent in the quarter ended December 31, sales of iPads increased by 17 percent, wearables and related accessories rose 33 percent, and Apple's service business grew 19 percent year-on-year. The combined sales of these segments reached a record high in the quarter.
Life Beyond IPhones
The predicament in which Apple finds itself is clear. It must diversify its income base quickly enough to keep its growth engine running when the bread and butter sales slows.
That challenge is undoubtedly big, but not too difficult for the company to overcome. Apple has one of the biggest lenders in business and a history of surprising its customers with innovation.
The revenues in the first quarter gave us some indications that the company is already on its way. Expenditure on research and development, for example, reached a record $ 3.9 billion in the quarter, up 15 percent year on year. The company expected operating costs to increase by nearly 14 percent year-on-year in the quarter of March.
To prepare for the life behind iPhones, Apple has many product offerings in the pipeline that could potentially reduce the decline in total revenue. Last month, Apple CEO Tim Cook spoke to CNBC. In 2019, the company will announce "material" new additions to its growing range of services.
The new services will be services that Apple "has been working on for several years," Cook said. Apple recently invested in health and well-being because it benefited from the success of the Apple Watch and employed dozens of physicians to support the health technology segment.
"I believe that if you zoom out in the future, and you look back and ask yourself the question:" What was Apple's biggest contribution to humanity? "It's about health," Cook added
The other possible launch in 2019 is the media bundle, including video streaming, Apple Music and the Texture news app. These additions will certainly reinforce the appeal of Apple's family of hardware and help to revive the sales of iPhones.
The other game-changing weapon that Apple has not tested so far is a low-priced iPhone developed for low-income countries such as India. That product will certainly put an end to Apple's one-size-fits-all-markets approach, but could unlock huge potential and penetrate markets where Apple must be able to resonate well with local customers.
We will not be surprised if such a product is already in the pipeline to capture the market share in India, for example where Apple has only 1% of the smartphone market.
Bottom Line
It is difficult to predict whether Apple shares (NASDAQ 🙂 will be able to support their current earnings, given the highly volatile macroeconomic environment and the growing unease among investors about high-growth stocks. But if you are a long-term investor, it is important to remember that Apple has both financial and technological superiority to overcome its iPhone challenge. If you invest in this great company with that kind of mindset, the daily market sound should not shake you off.
