What a difference a year can make. At the beginning of 2014, Apple (NASDAQ:AAPL) was widely viewed as a struggling tech giant that lost its taste for innovation. Doubt reached its pinnacle when shares plunged 8% in a single day after the company reported mixed earnings and a disappointing outlook. However, shares rebounded to finish the year with a 38% gain. Now, Apple is off to an amazing start in 2015 after reporting the most profitable quarter in history. Some investors may believe the upside is limited, but there are at least five core reasons why you should still buy Apple.
The most crucial ingredient of running a successful business is the ability to attract customers and earn a profit. In Apple’s case, money practically grows in a orchard as far as the eye can see. Apple’s net income of $18 billion in the first quarter ended December 27, 2014 is the largest earnings gain in the record books. Its only rivals are oil and gas companies.
Apple receives the majority of its revenue from the iPhone. In the most recent quarter, total iPhone sales reached a record $51.2 billion, up 57% year-over-year and more than half of Apple’s earth-shattering $74.6 billion haul in the quarter. The iPad and Mac product lines followed at $9.0 billion and $6.9 billion, respectively. The success of these products lead some people to believe that Apple is merely a hardware company, but software such as iOS, iTunes, iCloud, and the App Store help build an ecosystem that keeps customers coming back.
During the first week of January, the App Store set a new record for billings with customers around the world spending nearly half a billion dollars on apps and in-app purchases. Furthermore, New Year’s Day 2015 marked the single biggest day ever in App Store sales history.
Apple’s impressive profit history has also allowed it to accumulate and distribute an unprecedented amount of cash. Taking the total of Apple’s cash and cash equivalents, short-term marketable securities, and long-term marketable securities, the company’s cash position grew to $178 billion at the end of December. Apple has nearly $32.5 billion in long-term debt, but this is due to its record capital return program. By the end of 2015, Apple will return over $130 billion to shareholders through dividends and share buybacks. Using debt to accomplish this helps Apple reduce its taxes. In April, Apple will mostly likely announce an expansion of its capital return program.