Apple on track to become $2trillion company by December 2020?

[Deleted User]

sebtomato wrote: »

Most of Apple's profits come from the iPhone (basically, one product). Not a good position to be in, long term, particularly when the competition is heating up (specifically, the Chinese brands) and also expensive phones are no longer subsidized by operators (quite a different story to pay monthly for a phone and package, as opposed to paying £600 at an Apple store for a phone upfront, which not many people can or are willing to do).

I know so many people around me that were convinced that their iPhone was a superior product (the power of a brand/marketing), and have now switched to Chinese brands or Samsung without regrets... Apple's marketing won't work for ever, and consumers are getting more clever now.

Not much innovation in recent years, more following what other bands already do (e.g. wireless charging, waterproof phones, OLED screens etc). Apple is also very dependent on other manufacturers for parts and components (e.g. memory, screens, sensors, batteries etc). All they need is one manufacturer deciding not to share an innovation (e.g. a new type of battery), and the bulk of their business is suddenly under severe threat...

Unless they come up with unique products or innovations soon (new product category, which Tim Cook, basically an accountant, has failed to do), I would love to see what the company will be valued at in a few years' time.

The iPhone has been a fantastic business, but they need to find something else to drive the business growth going forward for years to come, and it's long overdue now.

On paper what you say could make sense and could happen but then again I seen many many people say those exact same things at various points over the last 10 years.

People dismiss the watch and AirPods because they don’t have the same growth as the iPhone but in their own right they would be successful businesses but so many people make the foolish assumption that if it’s not as big as the iPhone it’s a failure which is just lazy thinking .

Apple Is not about coming to market first with a product. They do innovate and build upon their products year on year.

Integration of their products helps create a stickiness that ensures customer loyalty is high. Well built products and good customer service will ensure customer satisfaction. Apple do not need to sell a new iPhone to all their customers every year but instead just need to keep innovating on all their products and build upon their services so that eventually when a customer is ready to upgrade their phone they will be more likely to stay with Apple than switch to another competitor.

sebtomato

Deleted_User wrote: »

People dismiss the watch and AirPods because they don’t have the same growth as the iPhone but in their own right they would be successful businesses but so many people make the foolish assumption that if it’s not as big as the iPhone it’s a failure which is just lazy thinking

Going back to the OP's original question: is Apple's market valuation going to double in the near term? Based on products without the same growth of the iPhone, and the iPhone itself under severe threat, I don't think so.

It doesn't mean some of their products won't be successful, but they are yet to find something that can replace the growth and profits generated by the iPhone over the last 10 years....

sebtomato

Alistair31 wrote: »

Apple’s services business is a major focus and a major revenue stream, its only going to get bigger.

It's only going to get bigger if the iPhone user population stays the same or increases, and there is a lot of evidence that the iPhone is losing market share and declining...

Apple's Services business is highly correlated to the iPhone, once again.

MaxiRobriguez

It's not just about the argument on whether Apple is a growing business or one that is reaching a plateau (both of which are valid forecasts), but whether an investment in Apple now makes sense. That decisions involves more factors than whether the business is good or not.

I wouldn't buy individual Apple shares for two main reasons:
1) I own them anyway by way of US index funds making up c.25% of my total portfolio, so roughly 1.25% of my total portfolio is Apple shares.
2) They're expensive by many stock valuations metrics, and in a world with slowing growth and growing inequality then I wouldn't want to buy a stock that is heavily reliant on high prices and consumer loyalty, both of which are likely to be the first things to go when the next crisis hits.

[Deleted User]

sebtomato wrote: »

Going back to the OP's original question: is Apple's market valuation going to double in the near term? Based on products without the same growth of the iPhone, and the iPhone itself under severe threat, I don't think so.

It doesn't mean some of their products won't be successful, but they are yet to find something that can replace the growth and profits generated by the iPhone over the last 10 years....

I don’t know how the stock market ticks and don’t invest in it but all I’m saying is those arguments you made have been said numerous times and have been proven to be wrong.

The growth success of the iPhone was a once in lifetime thing, No other product in history as had that same success so for anyone to assume that Apple must produce that to have their stock grow is wrong.

Apple has been doing many different things over the years to keep their stock value appealing to certain investors. To name but a few, new product categories, services and to a certain extent buyback of their shares.

The only time the iPhone has seen explosions in growth was when they entered new partnerships with carriers that originally they had no presence in. The only other time after that was when they offered the bigger size phone with the iPhone 6. So from around 2015 onwards iPhone sales have been pretty much the same and like any mature market it will never get back those days of mass growth. However if you look at the share price that has been going upwards over the long term.

Malthusian

MaxiRobriguez wrote: »

2) They're expensive by many stock valuations metrics, and in a world with slowing growth and growing inequality then I wouldn't want to buy a stock that is heavily reliant on large margins and consumer loyalty, both of which are likely to be the first things to go when the next crisis hits.

Other way round. Growing inequality means total wealth is increasing. The rich get richer, the very rich get very richer, the poor get slightly less poor, and the rock bottom stay where they are, which means equality increases. This is good for Apple. Slowing growth is still good for Apple, just not as good as rapid growth.

Growing inequality / wealth could in theory unseat Apple because of increased competition from overseas, from the people who thanks to growing inequality are able to become engineers and designers rather than factory workers or sustenance farmers. But this would be something of a black swan rather than a correlation.

If the world economy enters a mass depression, which will increase equality, that would be cause for fear for Apple holders. And everyone else.

MaxiRobriguez

Deleted_User wrote: »

Apple has been doing many different things over the years to keep their stock value appealing to certain investors. To name but a few, new product categories, services and to a certain extent buyback of their shares.

Ultimately in the long run these things don't matter, it's the earnings growth, margin and cash in the bank that matters for investors. Apple has done exceptionally well on those metrics this decade but those things don't continue happening ad-infinitum just because they have recently.

Buybacks may help short term share price but may cause reduced sentiment in the future because:
1) The company doesn't think there's any suitable growth opportunities to use the cash in the bank to invest in which weighs on investor sentiment for growth expectation.
2) The company uses currently cheap debt to facilitate the purchase which may be prone to change.
3) Management makes the decision in order to hit specific share price targets which questions the validity of the strategy and the management team.

If you've got a large allocation to US index funds then you don't need to buy individual Apple shares in my view.

MaxiRobriguez

Malthusian wrote: »

Other way round. Growing inequality means total wealth is increasing. The rich get richer, the very rich get very richer, the poor get slightly less poor, and the rock bottom stay where they are.

That's not what's happening in reality. Middle and lower income have seen a real terms pay cut since the financial crisis as pay lags inflation. Consumer debt growth took over the steering wheel but peaked in 2018 and has been withdrawing since.

The continued combination of those phenomena will result in fewer people in the middle/lower brackets spending large sums on expensive Apple tech. The middle/lower earners make up the vast bulk of the population.

As others have mentioned, Apple iPhone sales have been flat for three years, and most of the past three years have involved positive media coverage of the economy and general consumer confidence.

Again, not saying Apple cannot continue to grow sales and no doubting they've been an excellent business, but the OP was talking about an investment in Apple, and an investment requires assessing not just the capability of the business but it's price and wider socioeconomic risk. Apple is a high risk investment in my opinion as it has a much greater capability for large swings in either direction. People shouldn't think of it as a 45 degree angle stock.

[Deleted User]

Malthusian wrote: »

Other way round. Growing inequality means total wealth is increasing. The rich get richer, the very rich get very richer, the poor get slightly less poor, and the rock bottom stay where they are, which means equality increases. This is good for Apple. Slowing growth is still good for Apple, just not as good as rapid growth.

Growing inequality / wealth could in theory unseat Apple because of increased competition from overseas, from the people who thanks to growing inequality are able to become engineers and designers rather than factory workers or sustenance farmers. But this would be something of a black swan rather than a correlation.

If the world economy enters a mass depression, which will increase equality, that would be cause for fear for Apple holders. And everyone else.

Your last point makes so much sense to me. I would rather have a company which has large margins and loyalty from customers so I could absorb or ride out a crisis. How does low margins and fickled customers put you in a good position when the next crisis happens.

The only thing that concerns me is how much Apple could be exposed to the geopolitics of China/USA not having large margins and customer loyalty.

sebtomato

Deleted_User wrote: »

However if you look at the share price that has been going upwards over the long term.

Share price will go up if the company value is perceived to be worth more.

On the basis that the iPhone is the main source of profits for Apple, it's under severe competition (only starting), and they are going to have to cut its price (and therefore decrease their profits on each unit) as they have already started (not many people apart from hard-core fans are willing to pay £1,000 for a logo anymore), then company valuation only has one way to go...unless they find a new product category soon to carry over the growth (and the iPhone was a one-off opportunity).

People thought they were investing in electric cars, but they apparently let most of their team go. Tim Cook is an accountant, not a visionary. He has managed to milk as much as possible from the iPhone (well done), and the Apple loyalty/brand but not sure/clear what the next move now... Head of design has left too.

They have just started Apple TV, which has basically one head show (Morning Show), which they paid $30M per episode for. A desperate late move and ridiculous amount of money for a TV series only visible to a very small audience, and an indication they have no clue on what to do with their massive pile of cash. So they might as well continue their share buybacks, which is an indication of lack of insights for other investments.

Based on the logic above, the company is not going to be valued twice as much anytime soon, and should start declining....