Munster: Apple’s Paradigm Shift

“Apple as a Service paradigm will not need a super cycle for the Apple story to remain favorable with investors.” —Loup Ventures’ Gene Munster

From a note to subscribers posted Friday:

As Apple’s market cap approaches $1T, it begs the question; can shares move higher? At Loup Ventures we do believe the Apple story is well positioned for future appreciation based on a longer-term, more sustainable investing paradigm. The recent move higher in shares of AAPL is likely an early reflection of this emerging paradigm shift…

Apple investing paradigms. About every 10 years, there is a new paradigm that drives investor thinking on the Apple story. It started with the growth of the Mac (’80-’85), then post-Jobs and competition from the PC (’85-’97), then the iPod along with its halo effect which increased Mac market share (’01-’06), and most recently, the iPhone (’07-present). We define the next paradigm as Apple as a Service.

Drifting away from product cycle hype and disappointment. What will slowly go away (may take a couple years) in this new way of thinking is hype ahead of new product releases and the inevitable anxiety related to unit sales once a product ships. We still think anticipation around new products will influence shares, but that influence will be shorter-lived. For example, Apple will likely release a larger-screen along with a lower-priced iPhone this fall, which will be good for iPhone demand but unlikely to yield a super cycle (greater than 10% y/y iPhone unit growth). The Apple as a Service paradigm will not need a super cycle for the Apple story to remain favorable with investors.

Also available as a YouTube video:

My take: Tim Cook has been promoting the Apple-as-service story for at least two years. What took everybody so long?

Good to remember: A paradigm is worth about 20 cents.

5 Comments

  1. Fred Stein said:

    Yup, Philip. Gene has old news and an old catch phrase.

    That said, the market still does not get it. Factoring in buy backs, the stock is worth about 20% more than current (new high) prices. Growth due to services, increases the value even more.

    1
    May 11, 2018
  2. Ken Cheng said:

    As Apple, Microsoft, Google, and Amazon approach $1T, have the LOLnumbers crowd of chicken littles said anything? Doug Kaas? Beuller? Anyone?

    1
    May 11, 2018

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