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Apple’s Brand Powers Profits

Apple (AAPL) has just come off of a record breaking quarter. A quarter in which iPad sales actually dropped year over year. There is no end in sight for the Cupertino juggernaut as profits look to find their way home during the upcoming holiday quarter. To borrow from former tennis star Andre Agassi’s Canon Rebel commercial tagline “image is everything”. For investors, the image of a strong brand that continues to resonate with a growing global marketplace points to a profitable quarter.

Tim Cook is the former Chief Operating Officer who had led the logistic onslaught on market competitors that has allowed Apple to continue to add percentage points to already healthy profit margins. The recently released iPad Air 2, iPad Mini 3 and 5K Retina Display iMac continues this mainstay. Frequently discussing the allure of the 5K iMac over the past couple weeks help me understand quite a bit. There is a small but profitable market for the display. Apple will rake in substantial profits that should contribute a company best profit margin percentage. I prefer to look at each Apple product line as a business unto itself. The iMac business has just cemented itself as a very profitable and growing business which will continue to add the company’s bottom line. I have to come back again to the main point of this article. The 5K Retina Display cements Apple as having the absolute best display in its class. Creative professionals will clamor for it and at the moment there just is not a suitable alternative. This only adds to Apple’s brand image as the provider of premium products and experiences. The market has proven to pay handsomely for Apple products big and small that carries on this tradition with no end in sight.

The iPhone continues to bring in the lions’ share of profits. This is not a bad thing as the iPhone brand has never been stronger. This coincides with the coordinated availability of the iconic iPhone brand in more and more global markets. The iPhone has become the new BlackBerry (BBRY). You would have to pry a person’s iPhone out of their cold, dead hand before they give it up. It is not a smartphone to a significant portion of users. The iPhone stands for excellence and a premium experience. That premium experience keeps users coming back for more, spending more and locking themselves deeper into the Apple ecosystem. Investments are on solid ground when this cycle is self-sustaining. The halo effect caused by the popularity of the iPhone has helped the Mac lineup achieve significant success and profits.

In a quarter where Apple did not release a single noteworthy hardware device for the Mac lineup sales grew by double digit percentage points. While PC makers are spending hundreds of millions of dollars in advertisements Apple simply opens the doors to its fleet of Apple stores and sit back and enjoy considerable profits and success. Come for the iPhone and stay for the complimentary Mac. Having a best in class MacBook Air with continuity features to show off to interested iPhone wielding customers should only help sales of the Mac lineup.

Investors looking for a highly profitable cherry on top to make overall profit margins reach record highs need only to look at the rumored Apple Watch high end going price. The United States has not been shy about buying all things Apple, many times simply because it is the popular thing to do. I can easily see celebrities flocking to have their very own Apple Watch to add to the cool geek factor so many are going for these days. The Apple Watch will be by far the best profit margin product in Apple’s hardware lineup. Investors should be prepping for the opportunity to add additional shares to their investment portfolios over the next couple quarters.

Bottom-line even in the face of sliding iPad sales Apple is still turning record breaking profitable quarters. The addition of high margin hardware like the new iMac and Apple Watch in a large, affluent market as the United States means the profits will continue to be record breaking. Adding China and Japan as markets that have displayed a hunger for Apple products and the evidence begins to pile up overwhelmingly in the bullish camp. Investors should not worry about market share numbers. Investors should stay focused on the truth that Apple continues to find ways to add high margin products to its lineups while continuing to reinforce the Apple brand as being synonymous with the word premium.