Apple’s iPhone Upgrade Program may warrant higher earnings multiple – once Wall Street grasps what’s happened

“By unveiling a new leasing program, Apple may have done more than just unveil an easier way to buy an iPhone — it may have completely changed its business model,” Chris Ciaccia reports for The Street.

“Apple has taken its cash cow iPhone, which accounts for more than two-thirds of quarterly revenue, and effectively turned it into a subscription business,” Ciaccia reports. “By doing so, this may warrant a higher earnings multiple over time, as Wall Street begins to fully understand the nature of this change.”

“By allowing customers to pay roughly $27 a month for the iPhone 6s or $31 for the iPhone 6s Plus, Apple has effectively created an iPhone-as-a-service business. Apple thus becomes less reliant on the number of iPhone units sold each quarter,” Ciaccia reports. “A smoothing out of revenue (Apple is slightly dependent on the holiday season) could cause investors to re-rate shares considerably higher.”

Read more in the full article here.

MacDailyNews Take: So, how long do you think it’ll take for Wall Street to figure it out?

SEE ALSO:
Apple shares could rally 50% on new iPhone Upgrade Program – September 14, 2015
iPhone Upgrade Program: Apple’s brilliant strategy to turn carriers into ‘dumb pipes’ – September 11, 2015
Apple takes aim at the carriers with annual iPhone Upgrade Program – September 10, 2015
How Apple’s annual iPhone Upgrade Program works and how much it costs – September 9, 2015

19 Comments

    1. no, they will twist this concept UNTIL THE IGNORATTI FIGURE IT OUT that is is a profitable idea, then wall street will swoop in and prey on them like a, relatively, fat slow moving herd

      buffalo got the same treatment, guns and trains, both much faster than the buffalo could comprehend or had experienced

      someone who reacts to near term news is like the buffalo, so slow compared to those machines that are programmed to shoot the bullet

  1. Apple, again, announces delays in delivery of iPhone. Some people may interpret this as Apple’s failure to anticipate consumer demand, a failure to ensure enough iPhones pass minimal manufacturing standard, or a failure to produce enough iPhones.

  2. The Wall St. fools only want to see number of units sold.
    They are not impressed with profit or any other reportable fact. In fact I believe they make up stuff just to suit themselves. Like all the rumors about supply constraints at iPhone launch. The fact is that Apple and its suppliers simply
    can’t make iPhones fast enough for initial demand. Maybe if Apple delayed iPhone introduction till Thanksgiving weekend, and built up a huge supply, would shut all these idiots up. I don’t fear that they could sell all they make… they do it now.

    1. Wall St wants to see sustained business model and not a possible fad that might go away once the market is saturated or a new thing comes. This turns the iPhone into a consumable commodity. This is very interesting.

      I wonder, though, why does Apple need a bank to do the financing?

      1. A sustained business model? What exactly is that in the tech industry. Is there really some business that doesn’t saturate at some point. Microsoft has a P/E of 30. Why? Because Windows 10 can’t reach a saturation point with everyone running to mobile products. How many years has Apple been selling the iPhone. About seven years Does that really seem like a fad to investors? It seems about as sustainable as any other product out there.

    2. You say that Wall Street only wants to see a huge number of units sold and you’re right, but I’m willing to bet if Apple started selling cheaper products, those same pricks would point to Apple’s shrinking profit margins. I say there is no way Apple shareholders are going to win and hoping for a higher multiple or greater share gains is simply futile. No matter what Apple does the naysayers instantly start yelling that it isn’t going to work even before it gets into practice. That’s something I find very disturbing. Amazon does everything right but Apple does everything wrong. Absolutely crazy.

  3. It’ll be interesting to see how that pricing works out. It probably doesn’t include service. It would be nice if it did, but that’s probably just wishful thinking.

    Or could it include service?

    Or am I right in thinking that service will be an additional $20?

  4. Apple is customer centric. If ever Apple management shows more than token concern for the quarterly movement of their market value, and/or those that attempt to second guess it, I’m out. Long on Apple since 2009.

    1. WAY long on apple, buying at $4.60 split adjusted who believes looking at the stock price distracts from the driving force at Apple which continues to shine, for short traders not so much, so they make noise to “push the cart” (cart before the horse reference here..)

      some things that are missed by analysts:

      Quality
      Upgradability
      interconnectivity
      longevity
      flexibility
      affordability (for above reasons)

      so, i am going to continue to be long and reap what i so believe in

  5. I think your question MDN is a gross over estimation of the capacity of thought for whore street and begs for a disclaimer.

    Your question really should read “If Wall Street figures it out how long do you think it’ll take?”

    It puts a much more appropriate perspective to the whole thing.

  6. That the plan includes Apple care is very smart. Customers who get a new phone each year are paying for an extra year of care that in theory can be transferred to the next owner. Apple can sell those used phones with a warranty, or simply pocket the difference. The same is true for Next plans, etc. (only it may somewhat benefit the carrier).

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