Why Apple Stock Climbed 11% in October

Apple’s non-iPhone revenue surged 17% last quarter.

| More on:

What happened

Shares of Apple (NASDAQ: AAPL) rose 11.1% in value last month, according to data from S&P Global Market Intelligence. The stock price has been steadily rising this year on the hopes that strong growth in services and non-iPhone products can pick up the slack on the top line.

With a saturated smartphone market, iPhone sales are not enough to grow the company anymore, but the fiscal fourth-quarter earnings report showed why that shouldn’t be a concern.

So what

The tech titan beat analysts’ estimates for revenue and earnings in the fiscal fourth quarter. Here’s a look at the key numbers:

  • iPhone sales came in at $33.362 billion, down 9.2% year over year.
  • The decline in iPhone was mostly offset by growth in services revenue of 18%.
  • Sales of wearables, home, and accessories climbed 54% year over year to $6.52 billion.
  • Total sales were $64.04 billion, up 1.8% year over year.
  • Earnings per share were $3.03, up from $2.91 in the year-ago quarter.

As CEO Tim Cook was quick to point out on the company’s conference call, Apple’s revenue excluding iPhone increased by 17% year over year. That number was not given to sugarcoat the decline in iPhone sales, as it’s still the largest source of sales for the company. The growth outside of iPhone points to the success Apple is experiencing as management shifts their strategy to monetizing the company’s massive base of users.

Here is how Cook described the momentum in services:

We established new all-time highs for multiple services categories including the App Store, AppleCare, Music, cloud services and our App Store search ad business. We are well on our way to accomplishing our goal of doubling our fiscal year ’16 services revenue during 2020.

Now what

Apple has received a lot of attention lately from its announcements to beef up its services category. Apple TV+ is expected to quickly gain a large subscriber base, since Apple is offering a one-year subscription at no charge to anyone who buys a new iPhone, iPad, Apple TV, iPod touch, or Mac. For those who don’t buy a new device, the $4.99 monthly price should be enough to win some subscribers, since it undercuts competing streaming services.

The Apple Card launched in August and the feedback from users has already been positive. Also, the new noise-canceling AirPods Pro just launched. Cook said during the call that “AirPods just keep hitting new highs.”

All of these services and accessories are a large and fast-growing business for Apple. The combined sales of services, wearables, home products, and accessories totaled $70.8 billion in fiscal 2019, which ended in September. That amount doesn’t include any revenue yet from Apple TV+, which speaks to the opportunity in front of the company, and why the stock is up 62% since January.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Ballard owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple and recommends the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

More on Tech Stocks

Hourglass and stock price chart
Tech Stocks

1 Canadian Stock Ready to Surge Into 2025

There is a lot of uncertainty about the market in general as we move closer to the following year, but…

Read more »

stock research, analyze data
Tech Stocks

Apple vs. Shopify: Which Stock Is the Better Buy for the Next 3 Years?

Apple (NASDAQ:AAPL) and Shopify (TSX:SHOP) are great tech titans, but they're ending the year with huge momentum.

Read more »

Investor reading the newspaper
Dividend Stocks

Emerging Investment Trends to Watch for in 2025

Canadians must watch out for and be guided by emerging investment trends to ensure financial success in 2025.

Read more »

nvidia headquarters with grey nvidia sign in front with nvidia logo
Tech Stocks

If You’d Invested $100/Month in Nvidia Starting a Decade Ago, Here’s How Much You’d Have Now

Nvidia has helped long-term investors create generational wealth. But is the tech stock still a good buy right now?

Read more »

chart reflected in eyeglass lenses
Tech Stocks

Is Shopify Stock a Buy, Sell, or Hold for 2025?

Shopify (TSX:SHOP) still looks like a tempting growth stock going into a new year with strength.

Read more »

A shopper makes purchases from an online store.
Tech Stocks

The Smartest Growth Stock to Buy With $1,000 Right Now

Given its solid sales growth, improved profitability, and healthy growth prospects, Shopify would be an excellent buy.

Read more »

Representation of deep learning neural networks and connectivity
Tech Stocks

Opinion: This AI Stock Has a Chance to Turn $1,000 Into $10,000 in 5 Years

If you’re looking for an undervalued Canadian AI stock with huge upside potential, BlackBerry (TSX:BB) should certainly be on your…

Read more »

chip with the letters "AI" on it
Dividend Stocks

The Top Canadian AI Stocks to Buy for 2025

AI stocks are certainly strong companies, and there are steady gainers in Canada as well. But these three are the…

Read more »