Wedbush: Within 2 years, Apple Silicon will be embedded across all its product line

Analyst Daniel Ives sees Tuesday's One More Thing event as a strategic milestone.

From a note to clients that landed on my desktop Sunday:

We view the chip announcement as the first step of many more on the horizon in our opinion as Cupertino takes the reigns (sic) of its architecture and the cross pollination between software and hardware become ubiquitous over the coming years. We note that Apple currently uses Intel processors in the flagship Mac product line, with this week the company embarking down a new chapter by announcing its own new processor architecture that will focus on speed, power/efficiency, and more improvements/flexibility for its all-important developer community. From a chip perspective, Apple's first ARM Macs will be based on the core A14 architecture seen in the iPad Air and iPhone 12, with these processors expected to be optimized for the unique heavy duty power characteristics of the company's laptops and will take roughly 2 years to be embedded across the entire Mac product line.

Maintains Outperform rating and Street-high $150 price target. 

My take: Meanwhile, reports of strong iPhone 12 preorders give Ives, unsurprisingly, "incremental confidence" in his supercycle thesis.

9 Comments

  1. Michael Goldfeder said:
    Regardless of anyone’s political preference, I found this Tweet from the actor, James Woods, to be quite interesting and am posting it here for investment related reasons only.
    James Woods Tweet from 11-6-2020:

    “Greatly relieved. I just sold every single stock I own (except Apple, of course). It was my entire net worth. I may be wrong, but It is a choice I’ll live with.”

    3
    November 8, 2020
    • Jerry Doyle said:
      @Michael Goldfeder: James Wood is one of the excellent seasoned actors. Interesting tweet, though, since a divided government is good for stocks. As long as he allocates his portfolio to stay-at-home and COVID-19 plays, he should do extremely well going forward in 2021 with the coming “stimulus” package, low interest rates and an accommodating FED.

      I’m a little puzzled why he liquidated his entire portfolio with the exception of Apple, which I get why he hung on to that equity.

      Apple’s best days lies ahead. I truly believe we are going to see growth performance throughout 2021-2022. I still have strong conviction that we will see Apple at $150 by the Q2 financial call.

      1
      November 8, 2020
      • Jerry Doyle said:
        I may also add, that we have both Houses of Congress supportive too, of a large national infrastructure package. There is going to be so much liquidity flooding the economy that markets will need dams, salt domes and storage tanks to accommodate the monetary overflow for many stocks that will benefit from this economic environment. One infrastructure component learned from COVID-19 is the critical need to upgrade our nation’s broadband system, and that most certainly will happen.

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        November 8, 2020
  2. Bart Yee said:
    Whatever the incremental effects on revenue and Mac sales, this move is the culmination of Apple’s vertical integration of design, hardware and software = product without the attendant risks of in house chip fabs (except for R&D purposes), major assembly work (except for Macs), and reliance on outside vendor’s critical yet off the shelf parts.

    Apple can now customize their most important and performance influencing components. Plus, building out second sources for OLED panels is a prelude to Apple getting MicroLED displays into production by a partner supplier.

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    November 8, 2020
  3. Fred Stein said:
    Good time to revive the “magic carpet” metaphor for ever increasing installed base of A-series devices. In the last 20 years, Apple doubled it share of the PC market. Apple’s share of SmartPhone IB increases because iPhones out last Android 2 to 1. Watch and ear gear have no competition – that’s already over.

    Who knows? A-series in the cloud?

    1
    November 8, 2020
    • Romeo A Esparrago Jr said:
      WOW – great thought, Fred!
      Speculating how to get there, Apple Silicon gets to Mac Pros which now sells with a server rail mount option, and voila you’re there! A-Silicon in the Clouds. The potential for 3rd Party Cloud Systems Integrators (which could include Big Ones like IBM) is huge IMHO. Can Apple grow it to their own Services to compete w/Amazon AWS or keep it just as HW w/awesome server/cloud capabilities? Can’t wait to find out!

      1
      November 9, 2020
  4. Alan Trerise said:
    Haven’t heard enough about the impact of Apple silicon on margins beyond capturing Intels margins which are around 60%. Apple also eliminates the cost of a AMD/Nvidia GPU. They utilize unified memory (CPU and GPU share) so they eliminate GPU memory. Logic board size and complexity is reduced to save cost. Going from 10nm to 5nm saves both space and power possibly eliminating expensive thermal solutions. They may use the same memories (volatile and nonvolatile) as iOS devices reducing cost by increasing volume purchases.

    I’m certain there are other cost savings. I don’t see them passing savings on to customers since it would conflict some with high end iPads. Instead it will all go to gross margins. They may choose to reduce education pricing to better compete with chromebooks. iPhone customers (consumer and business) will give the new Macs a serious look once they realize all iOS apps will run natively on them. I expect volumes to increase materially.

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    November 8, 2020
    • Jerry Doyle said:
      @Alan Trerise: Excellent comment Alan T. Most informative. You need to weigh-in more often with your postulates.

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      November 8, 2020
    • Gregg Thurman said:
      They may choose to reduce education pricing to better compete with chromebooks

      An excellent, insightful post. I especially like the observation of increasing differentiated pricing for education. Get those little minds attached to Mac hardware, and learning iOS programming early, just as Microsoft did decades ago.

      Write once, use anywhere in the Apple universe (with some minor hardware specific tweaking). One “App Store” with literally thousands of titles, mostly costing 99 cents.

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      November 8, 2020

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