Morgan Stanley team replacing Katy Huberty following her promotion think so:
"We believe a more pronounced shift to a subscription-like model could add roughly $1 trillion to Apple’s current market capitalization. As we’ve long argued, Apple’s industry-leading retention rates and expanding ecosystem of hardware and services has already created one of the world’s most valuable technology platforms that centralizes and controls everything from traditional communication to entertainment, social media engagement, photo & video development, gaming, business, payments, travel, fitness, and more.
However, the market continues to value Apple shares more like a traditional – albeit best-in-class – technology hardware platform, at 22x EV/FCF vs. 31x for the average SaaS [Software as a Service] model and 44x for subscription-driven streaming platforms. We believe that as Apple’s installed base matures, retention rates maintain or improve from already high levels, new market opportunities emerge, and Apple proves they can drive sustained growth in spend per customer, investors will begin to gravitate towards a more lifetime value (LTV) based valuation approach. Our new, interactive LTV DCF [discounted cash flow] model, with what we consider to be conservative assumptions, suggests long-term valuation upside to just over $200 per share, or a >$3 trillion market cap – over 30% higher than Apple’s current market cap. We see Apple’s CY22 year-end installed base disclosures – provided in January 2023 – as a key catalyst for the market to begin pricing in this model transformation, while a formal shift to a pure subscription model, reported earlier this year, would perhaps have an even greater valuation impact, in our view…
https://www.ped30.com/2022/07/21/apple-erik-woodring-deep-di…
Mr. Buffett bought a tiny smidgeon of shares in Q1. Will be interesting to see if he bought more in Q2, as shares became cheaper. Certainly hope so.
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Interesting and hope their crystal ball is accurate. I imagine we added especially when it dipped into the 130s but I believe that was only for a couple weeks. WEB interestingly confessed to all they would have kept buying in Q1 (in low 150s) but the price bounced up. Curious where Buffett would cap the position size as it is now 41.5% of the investee portfolio. You know Tim was also aggressively using some of that 90B approved for buybacks. Cannot wait to see the 13F!
I don’t know much about Apple valuation, but I did just make the switch to Android.
Google offered me a $280 trade in for my tired-out iPhone 8 against a new Pixel 6a with free wireless earbuds. Apple offered $90. No free earbuds.
As a shareholder (through Berkshire) I’m happy if people are buying iPhones without big incentives.
Though I expect most buy them on the never-never through the phone co.
“Cannot wait to see the 13F!”
I can’t wait for Apple’s earnings next week
I think the challenge with Android is who you gonna call with issues? Google / Phone Manufacturer etc.
The walled garden is definitely more expensive but value is what you get.
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I think the challenge with Android is who you gonna call with issues? Google / Phone Manufacturer etc.
Well, when I had an Android phone, my first call would be to my carrier. With my iPhone, if I can’t google around and solve a problem myself, I’m still most likely to contact my carrier first, unless it’s obviously a hardware issue. (DW and I purchase our iPhones directly from Apple.) I’d also have posted something on TMF’s iOS board, but that option has been foreclosed, alas.
Fungi (long GOOG and, via BRK, AAPL; also quite happy with T-Mobile as our carrier and could see buying some TMUS at some point)
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Carriers have very poor customer device and weak technical teams
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Katy was a longtime Apple Bull and generally a lot right. Will miss her opinions.
For the firm to be worth another trillion dollars, they will have to have another trillion dollars
in present value of owner earnings beyond what was already expected.
With a 7% discount rate, that would be a hitherto unexpected additional $65.5bn in owner earnings per year, in today’s dollars, forever.
(and if there is any delay in its arrival, then even more later on. If the earning stream ever fades, then also more)
I suppose that kind of pleasant surprise happens, and I don’t rule it out as impossible.
But they called it “conservative assumptions”. I might want to see a few more hidden chickens hatch before counting on a trillion of them.
Jim
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Carriers have very poor customer device and weak technical teams
FWIW, that’s not been my experience with T-Mobile, esp. if we visit the nearby store.
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