In early September 2018, Apple launched a trio of new iPhones including a refreshed iPhone X, called the iPhone XS (starting at $1,000), a new plus-sized version called iPhone XS Max ($1,100) and a relatively more affordable 6.1 inch LCD version called the iPhone XR ($750). While we don’t expect the new lineup to drive unit volume growth to the levels seen during the iPhone 6 cycle, due to a mature smartphone market, revenues should still see a very healthy jump due to a continued uptick in average selling prices, with mid-range iPhone customers likely to upgrade to the XR and premium buyers likely opting for the new iPhone XS Max (top models cost $1,450) .
Below are key drivers of Apple's value that present opportunities for upside or downside to the current Trefis price estimate for Apple:
For additional details, select a driver above or select a division from the interactive Trefis split for Apple at the top of the page.
Apple makes money primarily by selling mobile phones, computers, and tablets to consumers worldwide. Apple's well-known consumer products include the iPhone, Mac, iPad and the iPod media player. In addition to selling hardware, Apple makes money from services that include the App Store, Apple Music and iCloud. Apple introduced its first wearable computing device, called the Apple Watch in late 2014. Our valuation model is based on Apple's fiscal year, which ends on September 30.
We believe the iPhone segment is more valuable than the Mac and iPad segments for two primary reasons:
Gartner estimated that about 1.9 billion mobile phones were sold worldwide in 2015 compared to about 290 million PCs and 196 million ultra-mobile devices (Basic and Utility Tablets). Although Apple's iPhone market share remains quite small, the underlying market opportunity over the forecast period could be much larger.
In June 2007, when Apple entered the then-nascent smartphone market with the iPhone, Nokia and RIM were the only players in this segment. iPhone's success led to the entry of other players in the market, that has seen a huge spurt in demand in recent years. Today, consumers have a huge array of smartphones to choose from, including premium Android smartphones from Samsung and Google and low-cost manufacturers such as Lenovo and Xiaomi. While the smartphone market is expected to expand, much of the sales are likely to come from low and mid-priced handsets in emerging markets, while the high-end of the market - which Apple caters to - could become increasingly saturated. Apple posted a year-over-year decline in iPhone sales during FY'16 and we expect the company to post a double-digit percentage decline over FY'19 as well.
Apple's Services business has grown at a rate of over 20% between FY'15 and FY'18, eclipsing the iPad and Mac to become the company’s second-largest business segment with revenues of about $37 billion in FY'18. While the App store remains the primary driver of growth, services such as Apple Music are also gaining traction. Apple's base of paid subscriptions on its platform has also been rising steadily, with about 330 million active subscriptions at the end of FY'18.
Global tablet shipments have been sluggish on account of longer upgrade cycles for tablets and cannibalization from large-screen smartphones. Apple has been impacted, with iPad shipments declining by about 4% in FY'17 and remaining almost flat in FY'18. However, things could turnaround in FY'19, driven by Apple's two-pronged strategy of focusing on both value-priced tablets for casual users while catering to professionals with its higher powered iPad Pro devices, which are priced as high as $1800.
While the global PC market has been shrinking, Apple has largely been able to buck the trend given its superior product differentiation, proprietary Mac OS software and applications, sleek design and premium build-quality. Apple also benefits from the fact that it plays in the high end of the PC market – typically focusing on the lucrative $1,000+ price points – rather than the commoditized low and mid-range where a bulk of the volumes come from. For instance, shipments of Mac computers grew by about 10% year-over-year in Q3 FY'17, compared to the global market which contracted by about 0.5% per IDC.
There have been reports that Apple (NASDAQ:AAPL) could acquire key parts of Intel's German smartphone modem operations, as it looks to build its own 5G chips for the iPhone. ...More
iPhone shipments have been trending lower, driven partly by Apple's (NASDAQ:AAPL) move to bump-up its flagship iPhone prices to $1,000+. Over Q2 FY’19, volumes fell 30% YoY to 36.4 million, per IDC, and we project that FY’19 figures will fall by 15%. In this analysis, we provide a scenario which explores the impact on Apple if it decided to drop prices on its flagship iPhones. ...More
Apple (NASDAQ:AAPL) faces mounting risks in China, its third largest market, amid the re-escalation of the trade tiff between the U.S. and China. While Apple has already been witnessing lower demand in China due to mounting competition and higher prices on its new products, we project that sales could take a further hit due to anti-American sentiment. ...More
Apple (NASDAQ:AAPL) published its Q2 FY'19 results on Tuesday, reporting earnings that largely met estimates while guiding for a stronger than expected third quarter. Below, we provide some of the key takeaways from the company’s results. ...More
Apple (NASDAQ:AAPL) is scheduled to publish its fiscal Q2 results on April 30, reporting on a quarter that likely saw the company’s iPhone business continue to underperform, although the Services business likely gained further traction. Here’s a quick rundown of what to expect when the company publishes results. ...More
Apple (NASDAQ:AAPL) announced a slew of new services at its event on Monday, targeting the entertainment, financial services, news, and video game industries. ...More
The Wall Street Journal reported recently that Apple (NASDAQ:AAPL) and Goldman Sachs were working together to offer a new credit card. The card will apparently be tightly integrated with a native iPhone app and could lead to a broader partnership between the two companies to offer... ...More
Apple (NASDAQ:AAPL) is likely to unveil its new video streaming service at an event held in March, according to a report from Bloomberg. The new offering, which could launch sometime in the summer, is likely to be Apple’s most high-profile services launch since Appl... ...More
Apple’s (NASDAQ:AAPL) stock has corrected by over 20% over the last four months after the company cut its guidance for the holiday quarter, driven largely by woes in the Chinese market where iPhone sales have come under pressure. ...More
Apple (NASDAQ:AAPL) published its Q1 2019 results on Tuesday, reporting that sales of the iPhone declined by 15% year-over-year amid significant headwinds in China, where overall revenue dropped by close to 27% year-over-year, and a lengthening smartphone upgrade cycle in western markets. ...More
Apple (NASDAQ:AAPL) is expected to publish its Q1 FY’19 results on January 29, reporting on a quarter that saw the company experience headwinds in the Chinese market, amid weak sales of its latest iPhones, forcing it to reduce its revenue guidance in a rare move. ...More
Apple is reportedly in talks with multiple insurers, discussing possible ways to subsidize the cost of the Apple Watch for seniors on Medicare Advantage plans. ...More
With sales of iPhones and other hardware cooling off, Apple (NASDAQ:AAPL) has been turning to its Services business to drive growth. The company is expected to launch its own streaming video service this year, taking on the likes of Netflix and others. In this note, we take a look at what the service could mean for the company. ...More
We are cutting our price estimate for Apple (NASDAQ:AAPL) from $225 per share to about $175 per share, on account of a sluggish iPhone business and headwinds in Greater China. ...More
Last week, Netflix indicated that it would be stopping in-app subscriptions on Apple (NASDAQ:AAPL) devices, as it looks to bypass the commission that Apple charges on subscriptions made via iOS apps. ...More
Apple’s (NASDAQ:AAPL) Services business has grown at a rate of over 20% over the last three years, eclipsing the iPad and Mac to become the company's second-largest business segment with revenues of about $37 billion last year. In comparison, the iPhone business has expanded at a CAGR of just about 2% in the same period. ...More
Over the last month, Apple (NASDAQ:AAPL) has been promoting an iPhone trade-in program that gives existing iPhone owners generous device buyback prices if they upgrade to its new iPhones. ...More
Earlier this month, Qualcomm won a preliminary injunction from a court in China, banning the sale and import of multiple older iPhone models including the 6S, 6S Plus, 7, 7 Plus, 8, 8 Plus, and X, after it was found that Apple (NASDAQ:AAPL) was violating some of its software patents. ...More
Apple's (NASDAQ:AAPL) AirPods appear to be one of the company's most compelling products launched in the Tim Cook era, garnering positive feedback from both critics and consumers, while emerging as one of Apple’s best-selling accessories. In this note, we size up the potential financial impact of AirPods for Apple. ...More
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