What’s Really Going On
When Steve Jobs passed away the entire world was left with an emptiness, but Apple shareholders and analysts in particular were left to wonder what was next. We have been waiting for Tim Cook to put his stamp on Apple’s brand and we just got it. Apple has become combative, competitive and aggressive, attacking massive growth in all areas with reckless abandon.
Apple iPhone Powers Apple Pay
The mobile payment segment of technology will be enormous. It already stands at an expected $8.7 billion for 2015 and is expected to grow to $27 billion by 2016 and $3 trillion by 2022.
The largest banks are not only aware, but are in bold support of the shift to mobile payment. To the extent that a mobile platform like Apple’s increases payment volumes, the banks are ecstatic. Almost every major bank in the world is now an explicit partner to Apple Pay and most have happily agreed to cut transaction costs. In fact, here’s a snippet from Bank of America:
“[Bank of America is] convinced of growth that measures fully 200 fold in just seven years. By the year 2022, the mobile payments growth will reach a combined total of around $3 trillion.” – Source: Investor Place
This is not a small adjunct, this is a huge, future business line that in and of itself is easily worth $100 billion in market cap.
Apple iPhone Powers Apple Watch
How many Apple Watches will be sold? Who knows, but we do know it’s some percentage of Apple iPhones because the iPhone is the hub and Watch is the extension. One thing we must recognize that the main stream media just can’t help but get wrong over and over (and over) again is that version one of Apple products are not the end game.
“It took Apple 74 days to sell one million iPhones. It took 28 days to sell one million iPads.” – Source: Mashable
Expectations are that Apple sold one million watches in its first day. Here are some product reviews to remind us of how wrong it is to blindly follow main stream media and Wall St. for direction. They lack the vocabulary, and here’s yet more evidence, (a graphic from Motley Fool):
-source Motley Fool
Apple Watch is one of the few products that could have a substantial impact on Apple revenue and earnings this year and Wall Street has yet again, discounted it to essentially zero. Here’s a headline for you. “Wall St. was wrong about the Apple Watch.” That will be posted in about a year, and the publisher will be every major news service in the world.
The Apple Watch with the iPhone as its facility for distribution is going to be large enough to be an entire stand alone firm, much like Apple Pay.
Apple iPhone Powers the Apple Car
September 21st the Wall St. Journal reported: “Apple Inc. is accelerating efforts to build an electric car, designating it internally as a “committed project” and setting a target ship date for 2019, according to people familiar with the matter” (Source: WSJ).
The self-driving car market will take a few years to materialize, but if you’re looking for another “iPhone” size product, this is it, possibly several-fold over.
Navigant Research states:
“[T]he global light duty EV market is expected to grow from 2.7 million vehicle sales in 2014 to 6.4 million in 2023 under a base scenario.” – Source: Navigant Research
The average selling price for new cars in 2014 was $33,560 per USA Today. While that number includes trucks, we can use it as some sort of base. If 6.4 million EV sell by 2023 at an average price of $35,000 that’s a $224 billion industry. Again, the Apple Car will live in a segment that could easily be an entire company, ya know, like, say, Tesla.
The Apple iPhone Powers the Apple Car — it is the ecosytem that connects the consumer to the vehicle. The Apple Car is a part of home, and home is built on the foundation of the iPhone.
Apple iPhone Powers Apple Music
On October 20th, 2015 Tim Cook revealed that Apple Music service has 6.5 million paid subscribers with another 8.5 million users who are still in their three-month free trial period. As a comparison, Spotify has 20 million subscribers (Source: Fortune).
Bigger: Before Apple entered the smart phone realm, in the full year of 2006, worldwide smart phone deliveries totalled 64 million units. By 2014, 1.2 billion smart phones were sold . Further, Apple sold 74.6 million iPhones in one quarter last holiday season, larger than the entire worldwide smartphone industry in 2006. Apple explodes segments an order of magnitude larger just by entering.
Apple isn’t looking for 20 million Music subscribers, it’s looking for some massive multiplier and we have every reason to believe it will get it. And how will people listen to their Apple Music? The iPhone of course.
Apple iPhone Powers Apple TV
Tim Cook also just reported that Apple began taking orders for the new Apple TV on October 26 and that it will start shipping the product later that week (Source: Fortune).
A review of Apple TV from WSJ has such a good title, that I’ll just leave right here: Apple TV Review: A Giant iPhone for Your Living Room. And a quote:
“Think of Apple’s fourth-generation box as a way to turn your TV into a giant iPhone.”
Barron’s reported on Global Equities Research’s Trip Chowdhry when he said that the Apple TV platform “provides strong indication” that Apple TV will come with its own software development kit and its own app store, i.e. its own Apple TV ecosystem. And there’s the problem for Netflix, he argues, since in this ecosystem Netflix would be just another app, or a “second-class citizen.” (Source: New Apple TV Platform Is Bad News For Netflix: Global Equities).
Yes, the Apple TV is real, and it has huge upside. And yet again, we watch TV at home, and it’s the Apple iPhone that creates the facility for home (and thus the TV).
Apple iPhone Facilitates iOS
Let’s get a little techy for the purpose of getting a lot smarter.
Tim Cook made a stunning and rather violent attack on the entire mobile advertising world and especially an attack on Google. Here’s what just happened:
Apple released iOS9 and in that operating system users can implement ad-blocking apps that prevent mobile advertisements from appearing in the Safari browser. We can say instantaneously that 20% of Google’s advertising business is now in dire straits.
Apple didn’t just set out to kill Google’s mobile revenue, it decided to go ahead and take it for itself. Check this out from Benzinga:
This week Apple unveiled the Apple News app [which] does allow advertising, and publishers who sell their own ad space are able to keep 100 percent of their revenue. Apple takes a 30 percent cut of the ad space it sells on its own. Apple News has already made an impression on several big publishers like New York Magazine and The Washington Post, which are both expected to announce their distribution plans on the app on Thursday. – Source: Benzinga Pro
And yet one more piece. With websites and ads now living inside the iOS9 ecosystem, search will be done through the iOS search. Yes, Apple has now entered search as well.
Apple has instantly entered the advertising the world. A quarter ago, it didn’t even have an advertising arm. And the facilitator for iOS is of course, the iPhone.
For the Record, Don’t Worry About the Apple iPhone
Apple iPhone sales broke every record conceivable last year, and for the calendar fourth quarter of 2014, Apple broke an all-time record for the largest profit ever by any company. While people were awed by the results, Wall St. couldn’t help itself to then turn to the comparisons for this year versus last and how inconceivable it would be for the firm to repeat its success.
Guess what?… Apple is going to break that record again. Every quarter this year Apple has sold more iPhones than it did last year, and by rather staggering amounts. Last quarter Apple sold over 20% more iPhones than the same quarter last year. As Bastian said in the NeverEnding Story, “But that’s impossible!”
Well, it’s impossible if you listen to sources that don’t understand technology beyond headlines and click bait. It’s impossible if you believe Apple is a “phone company.” Apple’s iPhone is a home, it’s not a phone (I know, I just created an E.T. pun there). Don’t listen to the noise. It’s been far too long that the loudest voices have been heard and the knowledge has been suffocated.
There’s no malintent, it’s just bad information. Do you want to learn about a company (any company) from a journalist or a product expert? Friends, this is the time. Knowledge is power. Be Powerful.
Other People Providing Knowledge (in Finance) at an Extraordinary Level
@barronstechblog (Tiernan Ray)
@howardlindzon (maybe the best in the world at understanding trends)
@stocktwits (new curation method means I learn something new every day from that account)
@fhoro (Frances Horodelski)
@michaelsantoli (Michael Santoli from Yahoo! Finance)
@aarontask (Aaron Task from Yahoo! Finance)
@serwer (Andy Serwer, EiC at Yahoo! Finance)
@RyanDetrick (Ryan Detrick)
@jessefelder
@SoberLook
@benzinga (up and coming)
@business (Bloomberg Business)
@MrTopStep (Danny Riley)
@adamfeuerstein (Adam Feuerstein; biotech everything)
@JeffMacke
@seeitmarket
Many others — no hurt feelings here, this is not a comprehensive list. Also, there are some brilliantly talented day traders on twitter which I have not included in this list since it’s off topic. Just see who I follow and you’ll find them.
If you thrive on understanding what’s really going on in a company, beyond the headline noise: Then Join CMLviz: Get Our (Free) News Alerts Once a Day.
Thanks for reading.
Read more from Ophir on CMLviz.com.
Twitter: @OphirGottlieb
Author has a long position in AAPL at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
