How Does the World's Largest Public Company Keep Growing Like This?

In this segment of the Motley Fool Money podcast, host Chris Hill is joined by Fool analysts Jason Moser, Andy Cross and Ron Gross to talk about Apple's (NASDAQ: AAPL) first-quarter report, which left them with little to complain about. Revenue and earnings were up significantly, it sold 52.2 million iPhones, and its services segment and Apple Watch sales are shooting higher, too. And -- maybe because the share price needs supporting? -- it's planning to buy back another $100 billion worth of stock.

The Fools consider what's next for the company, weigh in on the long-discussed question of whether Apple should try to go downmarket, and talk about why Warren Buffett boosted his stake in its last quarter.

A full transcript follows the video.

10 stocks we like better than AppleWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

This video was recorded on May 4, 2018.

Chris Hill: Here's the only thing Apple did in its second quarter: double-digit growth in revenue, double-digit growth on the bottom line, and, oh, yeah, Andy, they announced an additional stock buyback plan of $100 billion.

Andy Cross: Amazing, and this was just a monster quarter for Apple. Then, Warren Buffett announced that, through Berkshire Hathaway, he bought 75 million more shares during the first quarter. That's almost $13 billion. The real exciting part with Apple is, they demonstrated that they are becoming truly more than just the iPhone. The iPhone still makes up 60% of their sales. Their Services now are 15% of their sales at $9 billion last quarter, up 31%. And wearables were up 50%. So, the Services like Apple Music, Apple Pay, iCloud, the storage, they really are becoming this different business than just a hardware company.

Ron Gross: Yeah, incredible quarter. And from the Buffett perspective, he didn't buy this for a trade. He sees long-term potential. He thinks of this as a consumer products company that's just getting it done, making products that people like, and that they'll continue to do that for years and years, if not decades and decades. And if it's good enough for him, I think it's good enough for me to hang on to, as well.

Jason Moser: Yeah. I mean, he liquidated his entire IBM stake in the process, too. I mean, Big Blue, that's been a core Buffett holding for many years. To see this shift, I think, tells you a lot. But, I think he's right. No, Apple is not necessarily the growth story that it once was, but it doesn't have to be. It's a very powerful brand. They make excellent consumer products.

I think, the one question mark I still have is from the global perspective, given what we know about Android's operating system, its domination of that global market share, you kind of wonder about how far Apple can take this beyond the North American market and perhaps more established markets. But, regardless, a phenomenal company, tremendous resources. It's hard to imagine not owning shares of this business.

Cross: I mean, the China business was awesome, especially with the iPhone X. They continue to see growth over there. But their paid subscriptions are now 270 million. That was up from 100 million last year, Chris. They continue to see growth in this area, and that's really where the growth is going to be. Even Buffett mentioned that today in his interview with CNBC.

Hill: Let me go back to Jason's point for a second. For a number of years, there was a legitimate question being asked of Apple with regards to essentially going downmarket, should they be doing this, should they be offering a much cheaper version of the iPhone to really get the kind of global penetration that you're talking about. I kind of feel like that's been put to rest now. Given all of their success, given that they're now a $925 billion company, and probably going to be the first one to a $1 trillion market cap, it seems like they almost don't need to.

Moser: No. And I think it's just keeping everything in context, too. It's hard to sit there and criticize a company for selling 50 million iPhones per quarter, and bringing in these billions and billions of dollars in free cash flow year in and year out. I mean, it makes sense for them to try to expand their consumer base and give something for as many people out there that might want it. And we're seeing that play out with the iPad strategy, for example. I don't know that it worked out necessarily as well on the phone side. But, again, it doesn't really have to. They do something really well, it's not a winner-take-all market. As long as they continue to pursue these other options besides the iPhones and Surfaces and whatnot, I think the business is going to do just fine.

Andy Cross owns shares of Berkshire Hathaway (B shares). Chris Hill has no position in any of the stocks mentioned. Jason Moser owns shares of Apple and Berkshire Hathaway (B shares). Ron Gross owns shares of Apple and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool is short shares of IBM and has 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.