Apple's Dominance In Smartphone Market Isn't Going Away

Apple (AAPL) may not sell the most phones out there, but its dominance in one specific area is what matters most to investors -- and this isn't likely to go away anytime soon.

In a recent research note, BMO Capital Markets analysts, led by Tim Long, noted that for the first time, Apple owned 103.6% of the profit in the smartphone market for the third quarter, the first time ever it had owned all of the profit and then some. "Apple was the big winner in the quarter, with over 100% of smartphone industry profits," Long wrote in a note to clients.

This is important, as the smartphone market is now mature, with shipments down 5% year over year in the quarter to 397 million, but up 4% sequentially, Long's research highlighted.

This is a great sign for Apple going forward, as the iPhone 7/7 Plus were not supposed to be a huge positive for Apple. A lot of people were going to wait until next year to upgrade their iPhones, or so the prevailing thought went.

As usual, the consensus on Apple has been wrong and Apple has proven that it knows what it's doing when it comes to upgrades. Given the excitement surrounding next year's models, it will be interesting to see how many people do upgrade next year as opposed to this year.

We're not likely to see the explosive unit growth we saw just a few years ago, so companies like Apple, Samsung and now Google are going to battle it out for profits. That's where Apple has dominated and that fact is likely to change anytime soon.

Apple is highly unlikely to see the most the most of anything, (though it is the currently the leader in the tablet market), but it's able to have such a high share of the profits in the smartphone market for a few different reasons.

Not only is its key competitor, Samsung, experiencing huge problems with the recall of its Galaxy Note 7, but unlike its competition, Apple makes both the hardware and software for its devices. While Google is also doing that with the Pixel phone (and early reviews have been positive), it's going to be a long time before Google approaches Apple-like levels in terms of unit sales.

As Apple continues to build out its ecosystem, including Apple Music, iCloud and other services designed for the iPhone, this strength is likely to continue to be one of the major areas the company can point towards as a positive.

Shares have had a nice run over the past six months and that momentum is likely to continue, as we get to the holiday season and beyond.

Not bad for a device that was largely glossed over when it was first announced.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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