O NASDAQ-100 technology industry The index comfortably outperformed broader stock market returns in 2020. Apple (NASDAQ: AAPL) was a big beneficiary of this increase, since the shares gained more than 80%, despite the drop in smartphone sales.
Performance of Apple shares, YCharts data.
Apple’s other product lines and its expanding service business helped boost revenue by 5.5% year-over-year in fiscal 2020, despite a 3.2% drop in iPhone revenue. In 2021, Apple could turn on the heat and deliver much better results than last year.
The company is prepared to take advantage of one of the biggest technology trends – 5G wireless technology – in style. But Apple also has other tricks up its sleeve. In fact, a number of favorable technology trends could make Apple one of the top technology companies in 2021. Let’s take a look.
Image source: Getty Images
The trend of 5G smartphones will be Apple’s biggest growth driver
Apple’s main supplier, Murata Manufacturing, estimates that at least 500 million 5G smartphones could be sold this year, up from about 300 million units in 2020.
Apple is likely to capture a good chunk of this growing market in 2021. TrendForce expects the iPhone to account for 35% of 5G smartphone sales in 2021. It also estimates that total Apple smartphone shipments could jump to 229 million units of an estimated 199 million units last year, a potential increase of 15%.
This bodes well for Apple, as the iPhone accounted for 50% of its revenue in fiscal year 2020, which ended in September last year. Analysts expect Apple’s revenue to increase 15% in fiscal year 2021. The arrival of 5G smartphones will be an important catalyst for this growth, but there are other favorable winds as well.
Sales of tablets and PCs will be another catalyst
Apple’s Mac and iPad sales increased in fiscal 2020. These two products produced 19% of Apple’s total sales. Combined revenue grew 11.3% year on year, and Apple is expected to maintain that momentum in 2021.
Manufacturers struggled to meet final market demand in 2020 due to component shortages. So don’t be surprised to see an increase in shipments for these devices this year. IDC estimates that shipments of desktops and notebooks may increase 1.4% in 2021. Sales of tablets may remain almost equal to last year’s levels, according to another estimate.
Apple is the largest player in the tablet market, with an estimated share of more than 56% at the end of 2020. It seeks to win more customers in 2021 with a new, more affordable iPad, according to supply chain sources. Apple is expected to price the new tablet at $ 299, which could help it get more share from lower-priced Android rivals.
Meanwhile, sales of Apple’s new MacBooks, powered by the M1 chip, are expected to shift to a higher gear this year. TrendForce estimates that MacBooks with M1 may increase their share of the laptop market to 7% this summer, compared to 0.8% today.
All of this indicates that the hardware products responsible for about 70% of Apple’s sales – iPhone, iPad and Mac – will continue to enjoy favorable demand trends in 2021.
The service business has an ace up its sleeve
Apple’s services business was in good shape last fiscal year, growing 16% over the previous year. It produced almost 20% of Apple’s total revenue.
This year, the service sector could benefit from the launch of the Apple One: a smart move made by the iPhone maker to group several services under the same umbrella. For $ 15 a month, Apple One subscribers get access to Apple Music, Apple TV +, Apple Arcade and 50 GB of iCloud storage. Subscribing to these services separately would cost the subscriber $ 21 per month. Apple One also offers subscribers the option to add Apple News + and Apple Fitness + to the package, along with 2 TB of iCloud storage, for a monthly price of $ 30.
Apple is targeting several areas of rapid growth with its package offering. For example, the mobile gaming market is likely to maintain the incredible growth it saw last year in 2021 and beyond. Apple One offers users access to more than 100 games, which subscribers can enjoy without ads and without having to spend money on in-app purchases.
The personal cloud storage market is expected to expand at a compound annual growth rate (CAGR) of 24.6% through 2027, according to Allied Market Research. Apple Music, in turn, is expected to become the mainstay of Apple’s service business.
In all, Apple added fast-growing verticals to the Apple One subscription plan. This could play a key role in attracting more subscribers, giving the services business a chance in 2021.
Why should you buy
Apple is on track to win on both the hardware and software side of its business in 2021. Analysts are forecasting a 20% increase in profits this year. Apple may even exceed market expectations, thanks to the huge demand for the iPhone 12.
In short, Apple looks like a well-rounded stock of technology that should benefit from several trends, ranging from 5G to the cloud and mobile games, giving investors a one-stop shop to buy in the rapidly growing markets.