“Venture capitalist Gene Munster told CNBC on Tuesday that there’s been a ‘paradigm shift’ in how investors view Apple,” Berkeley Lovelace Jr. reports for CNBC. “‘We’re referring to it as Apple as a service, and that’s not reflecting their services segment,’ the founder of Loup Ventures said in a Squawk Box interview.”
“‘This is a concept that the hardware is actually performing like a subscription,’ he added, noting that Apple consumers often exchange their old iPhones for a newer version about every three years. ‘If in fact that is the case, I think that the multiple on Apple will go up,’ Lovelace Jr. reports.
“Apple on Thursday became the first publicly traded U.S. company to hit $1 trillion in market cap,” Lovelace Jr. reports. “It also reported strong quarterly results last week, posting big beats on earnings per share and average iPhone selling price.”
Read more in the full article here.
MacDailyNews Take: Yup. Apple remains rodiculously undervalued regardless of Wall Street’s glacially slow recognitin of reality.
Apple’s services business is an unstoppable locomotive that, someday, even Mr. Market might fairly value. – MacDailyNews, August 9, 2017
Trillion, schmillion. Over time, Apple will go much higher than that. The company is currently horribly undervalued. – MacDailyNews, March 1, 2018
The next ten years are going to be absolutely amazing for Apple. The company has just started to really get going! — MacDailyNews, August 2, 2017
SEE ALSO:
Apple’s killer services business will be a profit monster within 10 years – July 16, 2018
Morgan Stanley: Buy Apple shares on the ‘emerging power’ of its services – May 24, 2018
Apple as a service: Services offer growth, visibility, and profitability – May 15, 2018
AAPL’s paradigm shift – May 11, 2018
Apple Services: The nitrous in Cupertino’s profit engine – November 27, 2017
Inside Apple’s massive services results – August 9, 2017
Misunderstanding Apple Services – August 7, 2017
Dispelling the Apple Services myth – May 3, 2017
Apple’s Services business: $7 billion in revenue last quarter alone – May 3, 2017
Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength – May 3, 2017
To paraphrase Alan Kay, people who are really serious about services should make their own hardware.
Apple is still going to be outperformed by the other FANG stocks in terms of share gains. It’s much easier for the other FANG stocks to gain in value when they have such high P/Es because big investors have more confidence in those companies to grow quickly. Facebook was down quite a bit upon earnings and yet suddenly gained around 7% in value with nothing I could see to drive the stock higher.
I’m only saying big investors don’t have much faith in Apple growing as a company. Apple isn’t using the same tricks as the other FANG companies especially when it comes to acquiring other companies. Apple is a value company and doesn’t use any of its resources to really excite investors. This isn’t a complaint, but an observation. However, I feel certain if Apple starts a bundled streaming service with both music and video it could really excite investors. I suppose that’s at least a year or two down the road.
Companies with large P/E multiples can go down as rapidly and as far as they go up. Any earnings disappointment or reducing in the outlook for future quarters can have an outsized impact on the stock price.
Companies may ride the P/E wave for years, but it will catch up with them unless they eventually begin to produce the earnings growth and profit to support the high P/E.
This is a *growth* issue. Apple is so large and already generates such huge revenue and profit that most analysts just cannot imagine Apple growing larger, or only very slowly. Each quarter they think that the “Law of Large Numbers” is going to stop Apple in its tracks. But Apple still has a lot of growing room available, both within the smartphone market and outside of it.
Responding to Alan Kay’s excellent point, why does Apple not make their own servers, to power their own services (and to enable organizations to more easily support macOS and iOS devices)?