“As valuable as Apple has become, it could be even more if the company comes to better resemble companies like Nike and Coca-Cola, new research suggests,” David Marino-Nachison writes for Barron’s.
“‘It is not necessarily far-fetched to argue that Apple could be valued more like a consumer brand,’ Bernstein analysts wrote Monday, also suggesting Estée Lauder and Louis Vuitton and noting that all four companies ‘command [price to forward earnings around] multiples of [about] 20 times 20% higher than Apple’s valuation today,'” Marino-Nachison writes. “Apple, they wrote, trades closer to 17 times next 12 month EPS, its highest multiple in about four years.”
““Like many consumer brands, Apple enjoys remarkable customer loyalty, high returns on capital, and relatively stable cash flows (particularly as the company expands its recurring revenue streams from services),’ Bernstein wrote,” Marino-Nachison writes. “But that’s where the comparison ends — for now, they wrote. ‘Consumer brands typically have very resilient revenues and free cash flow, driven by timeless products that do not go obsolete,’ according to Bernstein. ‘The vast majority of Apple’s revenues are derived either directly or indirectly from the iPhone, which — like all tech hardware — is fundamentally subject to replacement cycle elongation, commoditization, and/or outright disruption… For the stock to re-rate to the level of a top consumer brand,’ they wrote, ‘we would likely need to see the company migrate its current transactional selling model to a subscription-based model.'”
Read more in the full article here.
MacDailyNews Take: Apple has tremendous loyalty. Buying an iPhone every 1-x number of years basically is a subscription, regardless of how consumers look at it.