“This week Apple announced that iTunes has 575 million accounts. This is the 8th update (that I know of) over the last four years,” Horace Dediu writes for Asymco. “An iTunes account generates about $3.2/month in transactions. Put another way, during the last year, an average of $40/yr of economic value is generated by every iTunes account.”
“The practice of valuing a company by the rate of spending of its customer base is not uncommon, especially when the customer base is relatively loyal,” Dediu writes. “for a number of years — from 2009 until late 2012 — Apple’s users were valued (implicitly by the stock market) as likely to create a net present value of about $1200 in earnings. The current value is about a third of that, or $440 in earnings. Today’s expectation is therefore that each current customer will buy the equivalent of 1.8 iPhones. And nothing more, ever. A few months ago it was expected that each customer would buy three times as much.”
Read more in the full article – recommended – here.
[Attribution: Forbes. Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
I read the article. More wall street anal…..yst jargon. Yes the math works when you are talking walmart, sears, and target.
But Apple is a different company. It operates differently so one must think different about it. If they do not, then all their math is just numbers that mean nothing.
This added nothing to the analysis.
Your commentary was a meaningless statement showing you understand less than analysts.
I don’t get the negative votes given to eldernorm.
Either I misread what he wrote or 11 other people did.
I don’t about the negative voting, but Horace Dediu has demonstrated that the valuation of Apple customers has plummeted, despite no apparent decline in customer satisfaction.
One could argue that less affluent emerging markets will spend less per iTunes account.
Although you may disagree with my understanding, it is relevant to the discussion unlike eldernorm’s statement.
Let’s cool our jets regarding the fanboyism and start churning real reasons to mock an analyst.
Vote as you please. For the record, I don’t vote. Steve Jobs loves us all.
“Today’s expectation is therefore that each current customer will buy the equivalent of 1.8 iPhones.”
If you ever needed proof of the stupidity of the giant monopoly game that people’s lives hang on, there you have it.
What giant monopoly game?
I believe he’s talking about Wall Street. I don’t think it deserves to be called Monopoly, though. It’s a casino, if you ask me. It’s Vegas for the super-wealthy. The rest of us just hope for some table scraps at the big buffet, and that they don’t bankrupt us along the way.
Giant “Monopoly Game” is a board game frequently played in the United States. Where are you from?
I know they just made $30 off me. They’ve got the Godfather trilogy in HD (Coppola restoration) on sale for $10 a piece.
I never bought movies from iTunes before because it was too cumbersome to store them. But since iCloud, I can just download them whenever I want and start watching immediately after the download begins. Then I delete when I’m done and can re-download anytime I want. It’s damn near a streaming movie service (though I still hope for and expect an actual one). Now I’m building up a nice little digital movie collection that I can easily watch on my iPhone, iPad or Apple TV with a few taps. That cloud stuff has gone far to make the iTunes ecosystem even more bulletproof. And not only are they making bread off me from the purchases, they’re further locking me in. Now yous can’t leave.
Well, I’ve handed over my share ….. and some.
Non, je ne regrette rien.
Horace, as usual, is right on.
I just bought about $3500 worth of Apple hardware with my iTunes account. How does that figure in?
If my math is correct, and it most certainly will not be, then AAPL should be reaching $900/share in about 2-3 business days.
Nice article. He is pointing out that Apple is undervalued and in a solid way. By year end a sub $500 dollars apple will seem ridiculous.
Wallstreet is insane sometimes. Computer trading with computers. Allot of professional idiots buying stock because they are going up. They don’t really care or understand Apple. They should probably be forbidden to own the stock.