The NASDAQ-100 Technology Sector the index comfortably outperformed the broader stock market in 2020. appeal (NASDAQ: AAPL) was a major beneficiary of the boom, as the share rose more than 80% despite a slump in smartphone sales.
Apple stock performance, data by YCharts.
Apple’s other product lines and its booming services business helped grow revenue 5.5% year-on-year in fiscal 2020, despite a 3.2% decline in iPhone revenue. In 2021, Apple can turn on the heat and deliver much better results than last year.
The company intends to take great advantage of one of the biggest technological trends – 5G wireless technology. But Apple also has other tricks up its sleeve. In fact, a number of favorable technological trends could make Apple one of the best technological plays of 2021. Let’s see.
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The 5G smartphone trend will be Apple’s biggest growth driver
Major Apple supplier Murata Manufacturing estimates that at least 500 million 5G smartphones could be shipped this year, up from an estimated 300 million units in 2020.
Apple is likely to account for a good share of this growing market in 2021. TrendForce expects the iPhone to account for 35% of 5G smartphone sales by 2021. It is also estimated that Apple’s total smartphone revenue could rise to 229 million units from about 199 million units last year, a potential increase of 15%.
This is good for Apple, as the iPhone accounted for 50% of its revenue in fiscal 2020, which ended in September last year. Analysts expect Apple’s top line to rise by 15% in fiscal 2021. The advent of 5G smartphones will be a major catalyst that can drive this growth, but there are other backwinds as well.
Tablet and computer sales will be another catalyst
Apple’s Mac and iPad sales increased in fiscal 2020. These two products accounted for 19% of Apple’s total sales. Their combined revenue rose 11.3% year-on-year, and Apple can be expected to maintain this momentum in 2021.
Manufacturers struggled in 2020 to meet the demand for the end market due to a shortage of components. So do not be surprised to see an increase in the shipping of these devices this year. IDC estimates that shipping of notebooks and notebooks could increase by 1.4% in 2021. According to another estimate, sales of tablets could remain almost equal to last year’s levels.
Apple is the largest player in the tablet market, with an estimated share of more than 56% at the end of 2020. According to sources in the supply chain, they want to capture more customers in 2021 with a new, more affordable iPad. Apple is expected to price the new tablet at $ 299, which could help it take more share from cheaper Android competitors.
Meanwhile, sales of Apple’s new MacBooks, powered by the M1 chip, will have to shift into a higher gear this year. TrendForce estimates that the M1 – powered MacBooks could increase their share of the laptop market to 7% this summer from 0.8% at present.
All of this indicates that hardware products, which account for approximately 70% of Apple’s sales – iPhone, iPad and Mac – will continue to enjoy favorable demand trends in 2021.
The service company has a bait up its sleeve
Apple’s services business was good in the past financial year, with 16% growth compared to the previous year. It generates almost 20% of Apple’s total revenue.
This year, the services business could benefit from the launch of Apple One: a smart move that the iPhone maker is making to put different services together under one umbrella. For $ 15 a month, Apple One subscribers get access to Apple Music, Apple TV +, Apple Arcade and 50GB of iCloud storage. Subscribing to these services separately costs a subscriber $ 21 per month. Apple One also gives subscribers the option to add Apple News + and Apple Fitness + to the bundle, along with 2TB of iCloud storage, at a monthly price of $ 30.
Apple is focusing on several fast-growing areas with its bundle offering. The mobile games market, for example, is likely to sustain the tremendous growth it achieved in 2021 and beyond last year. Apple One gives users access to more than 100 games, on which subscribers can enjoy ad-free and without having to spend money on in-app purchases.
According to Allied Market Research, the market for personal cloud storage will expand by 2027 by 2027 with a compound annual growth rate of 24.6%. Apple Music is expected to become the backbone of Apple’s services business.
All in all, 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 business a shot in 2021.
Why you should buy
Apple is on track to win both the hardware and the software side of its business by 2021. Analysts predict 20% -plus earnings growth this year. Apple may even exceed the market’s expectations, thanks to the overwhelming demand for the iPhone 12.
In short, Apple looks like a well-rounded technology stock that will take advantage of diverse trends, ranging from 5G to cloud to mobile games, giving investors a one-stop-shop to buy into the rapid growth of these markets.