Should You Buy Apple Shares After the iPhone X Launch?

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Apple's (NASDAQ: AAPL) iPhone X has been so hyped up that CEO Tim Cook said in May that iPhone sales were lower because customers were holding out for this 10th-anniversary edition of the smartphone, which was unveiled at an event at Apple's Cupertino Campus on Tuesday, September 12. 

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The new iPhone 8 and iPhone 8 Plus models will be available for preorder on Sept. 15, while the more expensive and advanced iPhone X is available for preorder starting Oct. 27. 

The pent up demand for a new iPhone means Apple could see an explosion in iPhone sales as people leap to replace their old iPhone models. But will there be a corresponding explosion in Apple's stock price? 

The short answer is probably, yes. A number of analysts are expecting a "supercycle" as eager customers rush to trade in their outdated smartphone models.

But if you want proof, let's look back at when the iPhone 7 and iPhone 7 Plus models were released last year on Sept. 16, 2016. Since last year's iPhone launch, shares of Apple have risen 40.5% from about $115 to $161.40. 

As the chart shows, Apple went through some peaks and troughs in the past year. But this is a stock that has consistently climbed higher.

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In the early 2000s many investors lamented that they hadn't bought shares of Apple when it first went public in 1980. But even if you bought shares of Apple when the first iPhone came out in 2007, you'd still be doing very well. Apple's stock has risen an incredible 825% since the launch of its first iPhone ten years ago. 

Of course, Apple has been criticized for its dependence on the iPhone for revenue. Last quarter, iPhone sales brought in $54.4 billion, or about 69%, of Apple's total $78.4 billion revenue.

As the smartphone market matures, Apple looks to a new revenue booster

That's why Apple is looking to another segment for an additional boost: Services. The company has a goal to double its services business by 2020, Apple CEO Tim Cook said on the company's January earnings call. This implies services revenue of about $50 billion in about three years. 

Apple is on track to hit its ambitious goal after reporting an all-time quarterly services revenue record of $7.3 billion in August. That represents an impressive 22% year-over-year increase from the $6 billion reported in the year ago period. Apple said it saw double-digit growth in each of its geographic segments.

"Over the last 12 months, our services business has become the size of a Fortune 100 company -- a milestone we've reached even sooner than we had expected," Cook said in the earnings call. 

Services include revenue from the App Store, Apple Music, Apple Pay, AppleCare, iTunes, and iCloud. Apple CFO Luca Maestri noted on the call that Apple was up to 185 million paid subscriptions across all of its services.

The company continues to see an increase in its App Store revenue, and that should accelerate with the roll out of iOS 11, which will include a fully redesigned App Store experience. The new App Store will give users a better way to sort through categories of apps and games, including editorial picks, to help high-quality apps get noticed. The new iOS 11 is coming to current iPhones and iPads on Sept. 19, Apple said at Tuesday's event. 

Apple's dive into original content for its Apple Music subscribers, who pay $9.99 per month, could also help drive up services revenue. Apple appears to be serious about getting into original shows as it is setting aside $1 billion for this endeavor according to the Wall Steet Journal. Apple will be going up against giants like Netflix, which will spend $6 billion on content in 2017, according to CEO Reed Hastings, and Amazon, which spent an estimated $4.5 billion on content this year, according to JPMorgan. 

In conclusion, if you think the maturing smartphone market means trouble for Apple, then have faith in the growth of its Services business, which is on track to double its revenue by 2020. Apple's stock was a good buy when it went public in 1980. It was a good buy in 2007 when it released the first iPhone. And it's a good buy today. 

Let me put it this way: In my opinion, the best time to buy Apple's stock was yesterday. The second best time is today. 

Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, and Netflix. The Motley Fool has a disclosure policy.