In early September 2017, Apple launched a trio of new iPhones called iPhone 8 and 8 Plus – which are essentially upgraded versions of last year’s iPhone 7 – as well as an all new smartphone called the iPhone X, which features Apple’s first new industrial design in three years. While we expect both devices to sell very well, we do not believe that they will stoke an upgrade cycle on the scale of the iPhone 6, which helped Apple grow shipments by 37% during FY’15. The iPhone X - priced at about $1,000- may be out of reach for many potential customers, while the iPhone 8 could be viewed as being too similar to older iPhone models. That said, Apple appears to be focusing on protecting and maybe improving its gross margins, which have come under pressure over the last year or so.
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.
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
Apple (NASDAQ:AAPL) recently launched its first smart speaker, the HomePod. Unlike Amazon and Google, which have kept the price points on their smart speakers as low as $50 (and even lower with limited-time promotions) in order to maximize their installed bases and drive traffic to their e-commerce and search operations, Apple appears to be focusing on design and sound quality as its device is p... ...More
Apple (NASDAQ:AAPL) published its Q1 2018 results on Thursday, February 1, reporting a stronger than expected set of revenues and earnings, driven by higher average selling prices on its newest iPhones and a robust Services business. However, iPhone shipments saw a modest year-over-year contraction and the company’s outlook for Q2 2018 also came in somewhat lighter than expected. ...More
Apple (NASDAQ:AAPL) will publish its fiscal Q1 results on February 1, reporting on an eventful quarter for its iPhone business, which saw the launch of the flagship iPhone X and the first full quarter of sales of the iPhone 8 smartphone. ...More
The iPhone business remains the biggest driver of Apple’s (NASDAQ:AAPL) valuation, accounting for over 50% of the stock price per our estimates. The iPhone’s high ASPs and margins are especially crucial to this valuation, and Apple has been raising iPhone prices over the years, with ASPs growing from just about $605 in FY’14 to an estimated $730 in FY’18, as its new flagship devices spor... ...More
Over the last two weeks, Apple admitted that it was throttling of performance of iPhones as their batteries age while also issuing an apology to customers. ...More
Apple's (NASDAQ:AAPL) new iPhone X could see shipments slow down meaningfully after the initial wave of demand from early-adopters and holiday shoppers dies down. ...More
Apple (NASDAQ:AAPL) is likely to be a big beneficiary of the U.S. tax overhaul passed last week. The plan would lower the company's effective tax rate on its U.S. earnings, while providing an opportunity to repatriate some of its massive international cash holdings. Below we take a brief look at how Apple could be impacted by the tax plan. ...More
The top Chinese smartphone vendors are looking to make deeper inroads into the U.S. market as early as next year, with Bloomberg reporting that Huawei and Xiaomi are in talks with U.S. wireless carriers, including AT&T and Verizon about selling their flagship smartphones. ...More
Apple (NASDAQ:AAPL) recently confirmed that it is acquiring Shazam, the app that allows users to identify songs, movies, TV shows, and commercials using short audio clippings. ...More
Shares of Dialog Semiconductor declined by about 35% after a report in Nikkei Asian Review indicated that its largest customer, Apple (NASDAQ:AAPL), could start using its own power management chips beginning as early as next year. ...More
Apple's (NASDAQ:AAPL) stock has risen by over 45% year-to-date to about $170 per share, outperforming both the S&P 500 as well the technology indexes. ...More
We are increasing our price estimate for Apple (NASDAQ:AAPL) from $166 per share to about $180 per share, to account for strong momentum in the iPhone business and a robust outlook for the company’s services division. Our price estimate represents a slight premium to the current market price. ...More
Research firm IHS recently published its preliminary bill of materials analysis for Apple's (NASDAQ:AAPL) new flagship iPhone X, estimating that the 64 GB version of the smartphone costs about $370 to build. ...More
Apple (NASDAQ:AAPL) published its fiscal Q4 results on Thursday, November 2, significantly beating market expectations as its Services, iPad and Mac segments drove growth despite a transitional quarter for the iPhone product line. ...More
Apple (NASDAQ:AAPL) is expected to publish its fiscal Q4 results on Thursday, November 2, reporting on a transitional quarter for the company’s flagship iPhone product line. While we expect sales to be driven primarily by the iPhone 7 and prior models, the new iPhone 8 - which went on sale towards the end of the quarter - could also drive shipments to an extent. ...More