Back to Strategic Insights Blog

Why Apple is the Next Big Investment Opportunity

Why Apple is the Next Big Investment OpportunitySo many people are focused on Facebook’s upcoming IPO that they’re missing another investment opportunity that’s staring them right in the face: Apple.

Why Apple? Apple is about to launch their iPad 3. Plus, it doesn’t take a rocket scientist to see that the iPhone 5 will be coming this year, as well as a new Apple TV that’s been upgradeda Macbook Pro that’s based on their wildly popular Macbook Air, and a new Macbook Air that will have a significant update in its processing power. And even though Apple’s stock just passed the $500-a-share price, which might seem lofty, that number will grow even higher as the new products are launched. How can I be so sure? Well, let’s look at a few key things.

  • First, Apple has sold more iOS devices—iTouch, iPhone, and iPad—in 2011 than the entire number of Macs it sold in its 28 years. In less than 2 years, Apple has sold 55 million iPads. It took Apple 22 years to sell 55 million Macs. At their current rate, they are selling 87,000 iPads a day. Similarly, it took Apple 5 years to sell 22 million iPods but just 3 years to sell 22 million iPhones. Notice how the rate of selling increases while the timeline decreases with each device? This is not surprising, because as I travel and speak with executives and sales leaders from the largest companies in the world, I see something quite distinct: Business people are using iPads more than any other device. In other words, the corporate world has finally embraced Apple products as corporate tools.
  • The majority of Apple’s revenue comes from products that didn’t exist a little over 2 years ago. Does that mean they’re stopping their innovation? Not at all. In fact, it’s clear that if you take an iPod Touch or an iPod and you make it just a little bit bigger and add a phone, you have an iPhone. Make it a little bigger again and you have an iPad. Make it a little bigger again and have you iTV (which is different from Apple TV). Is iTV—essentially an iPad for your living room—really coming this year? A lot of rumors are saying that it’s the next natural extension and fit.
  • Finally, of the top 40 Wall Street analysts who follow Apple, 38 are rating it either a “buy” or a “strong buy.” Granted, Wall Street analysts don’t always pick the future very well, but recently they’ve been much better at scrutinizing the future of companies and being more careful about what they’re recommending. Shares of Apple have enjoyed a 40% rise just in the last year and a 500% gain in the last 5 years.

So does Apple have more room to go? Absolutely. They have the network effect taking place, which means the more they produce, the more they sell, and the more dominant they become. This approach to growth worked for Google and their rise to become the dominant search engine.  The better they were, the more people that used it; the more people that used it, the bigger they became; the bigger they became, the more they could grow. What this means for Apple is that they can produce a tablet with all the features and functions at a lower price than their competitors and still be profitable.

So should we all be excited about Facebook’s IPO? Yes. But let’s not lose sight of other opportunities staring us in the face.

Daniel Burrus

Article first published as Why Apple is the Next Big Investment Opportunity on Technorati.