Smartphone sales are not growing. Globally they are roughly flat YoY. iPhone customer remains extremely loyal as Apple has the highest loyalty rates of all smartphone OEMs globally (Apple’s 83%, Samsung’s 72%, Huawei’s 60% and no other OEM above 45%). Not only are retention rates for Apple stable, but so has the lengthening upgrade cycle of handsets stabilized.
… Dips in Apple’s stock have generally been followed by a continued and sustained growth streak. The question I get from investors now is along the lines of how high can it go? Can Apple get to a $2T market cap? I don’t have the answers to these questions, but if the growth areas continue to ramp, then I don’t think Apple stock is anywhere near its peak at the moment.
Wearables. …element that sets AirPods and Apple Watch apart from iPad is their connection to the iPhone. The iPhone is still the center of consumer’s computing lives and peripheral computing experiences like AirPod and Apple Watch, which leverage and, to a degree, augment the iPhone’s capabilities. My theory, for now, is those products that are companions to iPhone have a higher TAM potential when looking at how they can grow to the iPhone base of customers.
Services. Services are the other significant growth area for Apple, but also one where many questions remain, which may not be answered into well into 2020.
From all the data and global research studies I’ve seen, the highest any subscription service from Apple (iCloud and Apple Music) has penetrated is roughly 30% of the iPhone base. … data consistently shows when users get more capabilities (features, specs, etc.) on their iPhone, they do tend to spend more with Apple.
…as Apple’s customers get more expensive >$900 iPhones they tend to purchase Apple Care, which is also a sleeper revenue stream.
Again, the main question is how deep into the Apple customer base can Apple services realistically penetrate. This is where I think having a range of options of different services, and perhaps a bundle can help this revenue stream reach its upside.
Further, as we think about 2020, do not expect anything AR glasses from Apple in 2020. And while I do think Apple will get some lift for iPhone sales from 5G devices later in this year, I think the 5G iPhone story gets dramatically stronger in 2021/2022 and we will revisit that narrative toward the end of this year.