Will 2018 Be Apple Inc.'s Best Year Yet?

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This is Apple's (NASDAQ: AAPL) world, and we're just living in it. The consumer tech giant's stock hit fresh all-time highs late last week, and its market cap of $908 billion makes it the favorite to be the first company to top the $1 trillion mark later this year. Apple's in a great place, and we'll have a clearer snapshot after it reports financial results for its fiscal first quarter next week.

Apple shares have risen for eight of the past nine years, a scintillating 17-bagger along the way. This year is already off to a healthy start, with the stock up 5% through the first three weeks of 2018. History, momentum, and the growing ranks of iOS users suggest that the smart bet here is for Apple to have another winning year. It remains to be seen if the market will feel that way by the end of the year.

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Earning its keep

Next week's report will obviously set the tone for the stock's performance in 2018. It is Apple's historically strongest quarter as holiday sales and fall iPhone rollouts prop up revenue. Analysts are holding out for healthy growth on both ends of the income statement. They are modeling a record $86.5 billion in revenue, up 10.4% since the prior year's fiscal first quarter. Apple's own guidance is calling for a 7% to 11% increase, and analysts are perched near the high end of that range. Wall Street's also forecasting earnings per share climbing 12.5% to $3.78.

The late fall introduction of the iPhone X will be a big driver in those results. Growing its revenue by just a little more than 10% may seem unimpressive in light of the hype leading up to the iPhone X rollout, but this would only be the second time in two years that Apple achieves a double-digit gain on the top line. This should also be the fourth quarter in a row in which earnings-per-share growth outpaces sales gains, but it may wind up being more the handiwork of share buybacks than margin expansion this time around.

There's clearly a lot riding on the one-two punch of the iPhone 8 and iPhone X, as smartphones continue to account for more than half of Apple's revenue and likely an even thicker slice of its earnings. However, it was also encouraging to see Apple's 12% uptick in revenue last time out -- the only other time over the past two years with double-digit top-line growth -- fueled by a 34% surge in services revenue and a 25% uptick in Macs. Even the once seemingly fading iPad business clocked in with a 14% growth spurt. The only segment that didn't achieve growth north of 10% was the iPhone 8-led smartphone business, but the modest 2% advance there isn't so surprising with the iPhone X hitting the market the following quarter.

Taking a bite

This is already an interesting year for Apple. It announced last week that it will be taking advantage of new tax law changes to funnel $350 billion into the U.S. economy in the next five years. The new one-time repatriation tax rate will play a starring role in that initiative, though the results of that push will naturally extend beyond 2018.

Valuation will be another key driver for the stock this year. This should be the fiscal year in which revenue and net income exceed the high-water marks of fiscal 2015, but the stock's trading much higher than it was at that time. Apple trades at a discount to the S&P 500, though fetching nearly 16 times this year's profit target and a little less than 15 times analyst estimates for fiscal 2019 finds it at the high end of its recent range.

Apple's success as an investment in 2018 will ride on the continuing growth outside of its flagship iPhone business. Margin expansion coupled with kinder tax rates could also trigger another big year for investors. The risks are there for both Apple and the market alike, but it's hard to bet against the class act of Cupertino when the bulls have momentum.

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Rick Munarriz owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool 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.