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 estimates 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.
We estimate that Apple's iPhone gross margins were about 45% in 2016, compared to around 22% for the Mac.
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 the 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 see high single-digit growth in the near term, 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. That said, 2017 could be a strong year for the iPhone, as Apple launched a trio of new iPhones, including the completely redesigned iPhone X.
Global tablet shipments declined by about 20% in Q4 2016, according to data from research firm IDC, driven by longer upgrade cycles for tablets and cannibalization from large-screen smartphones. Apple has been impacted, with iPad shipments declining by about -14% in 2016, likely because of increasing tablet saturation in developed markets where high-end devices such as the iPad are more popular. Apple appears to be taking a two-pronged strategy with its tablet sales - focusing on both value-priced tablets for casual users while catering to professionals with its higher powered iPad Pro devices.
In mid-2014, Apple signed a deal with IBM that will see the two companies working together to further their enterprise mobility initiatives by bringing IBM’s cloud computing, big data and analytics capabilities to the iPhone and iPad. With the partnership, IBM will develop industry-specific apps and solutions for iOS devices, optimize its cloud services for the iOS platform and help with marketing Apple devices to enterprises. While Apple has been successfully increasing its presence in the enterprise space, the deal with IBM will give the company a more well-targeted push. IBM brings to the table decades of experience in understanding the needs of business customers and also has a sizeable sales force needed to cater to large corporations.
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.
Apple's services business has expanded significantly and the division is now Apple's second largest in terms of revenue, ahead of the Mac division. 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 240 million active subscriptions at the end of 2017.
We have increased our price estimate for Apple (NASDAQ:AAPL) from about $194 per share to $230 per share, to account for a strong revenue cycle over FY'19 driven by the company’s three new iPhones, continued strong Services momentum and expected updates to popular products such as the iPad and MacBook lineup over the holiday quarter. ...More
Apple (NASDAQ:AAPL) launched three new iPhones, which include an upgrade to the 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), which sports a similar design and signature features. ...More
Wireless home audio equipment maker Sonos (NASDAQ:SONO) published its first set of results as a public company, posting a year-over-year decline in quarterly revenues and a wider net loss, causing the company's stock price to decline by nearly 20% in trading on Tuesday, September 11. ...More
On Saturday, U.S. President Donald Trump indicated that he was planning another round of tariffs against China to the tune of $267 billion, which would come on top of the $200 billion in Chinese goods that the U.S. is already targeting. ...More
Apple (NASDAQ:AAPL) is expected to launch three new iPhones at an event next Wednesday. We expect the new line-up, which is likely to include a second generation 5.8 inch iPhone X, a plus-sized version of the iPhone X and a slightly more affordable 6.1-inch all-screen LCD-based device, to set off the biggest upgrade cycle for the company since the iPhone 6. ...More
Apple (NASDAQ:AAPL) stands out among companies with a retail-driven business model due to its negative cash conversion cycle (CCC) - which signifies that the technology giant largely runs its supply chain through credit extended by its vendors. ...More
Apple's (NASDAQ:AAPL) research and development spending has been trending higher, growing at a CAGR of about 25% between FY’14 and FY’17. That said, the higher R&D spending isn't exactly translating into meaningfully higher profitability for the world's most valuable company. ...More
Apple's (NASDAQ:AAPL) iPhone line-up looks set for a big refresh this fall, with the company expected to launch three new devices. While Apple is likely to introduce the second generation 5.8 inch iPhone X and a plus-sized version of the iPhone X, the company is also expected to launch a more affordable 6. ...More
Apple (NASDAQ:AAPL) posted a stronger than expected set of Q3 FY'18 results, driven by robust growth in its Services business and higher average selling prices for iPhones. Although Q3 is seasonally the weakest quarter for Apple, as it prepares to upgrade its product lineup ahead of the holidays, revenues grew by 17% year-over-year to $53.3 billion, while EPS rose by 40% to $2. ...More
Apple (NASDAQ:AAPL) will publish its Q3 FY'18 results on July 31, reporting on a quarter that likely saw continued strong performances by the iPhone and Services businesses. Apple has guided for revenues between $51.5 billion and $53.5 billion for the quarter, marking an increase of almost 16% at the mid-point from a year ago. ...More
Apple (NASDAQ:AAPL) is likely to launch its new iPhones this fall, in keeping with its regular upgrade cycle for its flagship smartphones. Well-respected Apple analyst Ming-Chi Kuo has indicated that the company could launch three devices, including a second generation 5.8 inch iPhone X, a plus-sized version of the iPhone X with a 6.5-inch OLED display, and a more affordable 6. ...More
Apple (NASDAQ:AAPL) could be looking to launch its own ad network which would distribute ads across apps, according to a recent report from the Wall Street Journal, as the company looks to shift to digital services-led growth strategy at a time when its hardware shi... ...More
Apple's (NASDAQ:AAPL) Services business has posted robust growth over the last few years, emerging as the company's second-largest segment after the iPhone. Services is essentially a catch-all segment for the Apple's non-hardware sales, and includes revenues from the company's content and app businesses, iCloud storage, Apple Care warranty and licensing revenues. ...More
Apple (NASDAQ:AAPL) published its Q2 2018 results on Tuesday, reporting a better than expected set of numbers that were driven by robust growth in the Chinese market (where revenues were up 21%), expanding iPhone sales and a soaring Services business. ...More
Apple (NASDAQ:AAPL) is expected to publish its Q2 2018 results on May 1, reporting on a quarter that is likely to see revenues and earnings grow meaningfully, driven by the iPhone and Services businesses, as well as the recent corporate tax reforms in the U.S. ...More
Apple (NASDAQ:AAPL) is expected to conduct a special event, called "let's take a field trip" on Tuesday, March 27. While the event is likely to see the company talk about multiple education-focused initiatives, including education-oriented software, there have been reports that Apple could launch a new low-cost iPad, priced ... ...More
Apple (NASDAQ:AAPL) is reportedly taking steps to design and manufacture its own display components for the first time, as it looks to reduce its dependence on suppliers such as Samsung Electronics, while keeping its component costs in check. ...More
Apple (NASDAQ:AAPL) recently announced that it will acquire Next Issue Media and its digital magazine subscription service Texture, as it looks to play a larger role in the content distribution space while augmenting its fast-growing Services business. ...More
Apple (NASDAQ:AAPL) shares are currently trading around an all-time high figure of $180. We believe that the current stock price represents the fair value for Apple's shares. However, the tech giant could potentially unlock a sizable amount of value for investors by introducing a cheaper version of the iPhone to target other segments of the rapidly growing smartphone market. ...More
Apple's (NASDAQ:AAPL) stock has performed well over the last year, rising by over 25% on account of increased optimism surrounding the iPhone business and solid growth of the company's Services business. In this analysis, we outline an upside scenario, which could see the stock rally by another 30% to levels of about $230 per share. Our base case estimates are for the market price of about $178. ...More