Apple is a Profit Machine, but can iPhone Hurt Them?

There is no question that Apple Inc. (AAPL, Nasdaq) market cap is unbelievable, now over $750 billion, but can the very thing that has propelled them hurt them? I am talking the tech giant’s on revenue from their iPhone.

So far the shares of AAPL are up 74 percent over the last year, but is there a chance they could fall? Then growth peter out? Absolutely. Some analysts, even myself, are beginning to question where the top is and we could be near it now. However, there is not a lot that will pull price down in the very short term. There are three trends that could affect smartphone sales though.

Growth in the smartphone market is getting ready to moderate lower. We are looking at 20 to 30 percent growth now, but this year the growth rate is expected to slow down to 5 to 15 percent growth. Global shipments is also expected to slow down from 26.3 percent in 2014 to 12.2 percent this current fiscal year. There are also expectations that consumers will not upgrade as fast as new features become, so “so what?” “This is not terrible exciting!” Another problem, perhaps the biggest one for Apple, is that phone carries will not be willing to subsidize phones as they once did. This will be a negative drag on sales.

Let’s face it, Apple does not control a big share of the apple, sorry no pun intended. In 2014, third quarter, Apple’s iOS only captured 11.7 percent of the smartphone market. Google’s Android market share stood at 84.4 percent.

Nearly 70 percent of the company’s revenue comes from the iPhone. Changes in the phone industry can be a drag, hence the problem with a company that is a one trick pony. What should Apple do? They should develop revenue generating services and tie those to their mobile products. Google (GOOG: Nasdaq) has done this very well through Google Play that produces a saturated revenue cash cow with healthy margins. Google has the ability to saturate a market with Android phones, drive prices down and at the same time monetize with good services.

Apple, is trying to break into electron transaction, with Apple Pay. A possible good service. However, it has only accounted to roughly two percent of all of the tech giant’s revenue to date.