Apple: Would being more like Nike and Coke help the shares?

“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.

18 Comments

  1. Cross your “T’s”, Dot your “I’s”, work like hell and Advertise… I wish Apple would do more general advertising, considering that Apple usually has less than 10 percent market share with whatever product, there are plenty more of those “Right Customers” out there using Android, Apple doubles by going from 10 % to 20 % market share. Seems too easy, yet, Microsoft did it, Google did it, Amazon is doing it, sometimes I feel its embarrassing,
    Everyone will stick up for Apples “Better Customers” but there are a lot of people and markets out there,
    No need for Apple to be controversial, just tell people why its worth it to use Apple products,

  2. Analysts are obsessed with making Apple appear to be similar to some business which they think they understand. For decades they have failed to understand what makes Apple work and are still trying tho fit Apple into some sort of familiar compartment.

    It’s Apple, it’s the world’s first trillion dollar company. Apple is not like any other company and doesn’t need to be. If it were like other companies, it wouldn’t be a trillion dollar company – just like they’re not.

    Apple plays by it’s own rules and has it’s own values and methodology. As it happens, it turned out to be a very successful formula. Analysts would benefit from learning from Apple rather than trying to change Apple.

    The fact that Apple can still be a trillion dollar company with such a ridiculously low P/E ratio is entirely a reflection on the market rather than on Apple.

    1. I couldn’t agree more. Why does AAPL need to do anything analysts suggest. Their predictions, as a group, about AAPL have been consistently wrong, even on a quarterly basis. It appears that the most valuable company in the world, making real products being sold sustainable pricing, reaching 1 trillion in market valuation first and rising like a rocket over the last three years, should make its own decisions, without the help of the analysts, who seem to completely and consistently miss the mark for AAPL and love AMZN, which sells everything in the world for the lowest possible margins and makes almost no profit. They do have market share, despite trading above 200:1 PE. Now there’s a consumer company!

    2. Wall Street most certainly believes Amazon is a better company than Apple will ever be and that’s what really matters. Imagine if Apple had a P/E of 100 or even 50. Nope. Apple is seen as a loser company with collapsing iPhone sales. No hope for Apple. Down for the count. Totally insulting despite being the first trillion-dollar company on the DJI. Wall Street still believes Apple was VERY LUCKY to get as far as it did but it can’t possibly last. Apple had luck but Amazon has Jeff Bezos who makes Bill Gates look like a pauper.

          1. You mean a percent (and maybe a large percent) but actually I DO know a lot of Nike customers.

            I also understand the longer he stays their “face” the worse the trickle down will be for sponsorship, investment and advertising.

            Maybe you don’t understand the ramifications of having a has-been short-careered athlete with a limited knowledge of society who spouts off from his golden throne about how unfair life is for minorities while breaking rules at work and crying when he gets fired.

            Fuck him.

            1. And yet, online sales are way up. It’s like when the left went after Hobby Lobby. Their favorability ratings went down (because people who had no opinion before didn’t like them), but their immediate sales went up (because their supporters voted with their dollars).

        1. Because it’s not half. Not by a long shot, and certainly not within their core customer demographic. And Nike is a worldwide brand, and their global popularity is a lot higher than our current President’s.

  3. Why this constant banter of raising Apple’s value to be equal to some other company’s value? It’s never going to happen. Apple will remain stuck in the P/E mud while the FANGs soar. Tim Cook surely doesn’t help because I think most big investors believe he isn’t aggressive enough as a CEO.

    It’s already insulting enough to Apple shareholders that Amazon has completely stolen the hearts, minds and souls of Wall Street. I remember when Apple used to be called the 800 lb. gorilla in the room. Apple has now been relegated as a teacup monkey on Amazon’s leash. As far as Wall Street is concerned, Amazon has already put Apple to shame in every way possible. There is going to be so much cheering when Amazon passes Apple in value as Amazon takes the crown everyone believe it rightfully deserves. Apple was always been considered a pretender and nothing more. With all the cash Apple had at its disposal, it could have been light years ahead of Amazon in value. Now Apple is just another company waiting to be overtaken in value by Amazon. Just another dead man walking.

    Anyone who thinks Apple will ever get some FANG-high P/E is just dreaming of an impossibility. Future value is all a matter of perception so unless there’s some general consensus on Wall Street of Apple figuring out how to create a fusion reactor inside of an iPhone, Apple shareholders will be shedding tears while Amazon shareholders are dancing a mile-long conga-line in the street.

    I’ll just have to settle for my quarterly Apple dividends which are fairly decent. They’re infinitely better than no dividends at all.

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