Apple

   

It's been eight years since Apple jumped into a new product category. On June 5 that will likely change when Apple is expected to preview its $3,000 developer version of a mixed reality headset at WWDC. Many investors are skeptical about the prospects of the device given headsets are currently a solution looking for a problem. I believe the trend of more immersive consumer tech experiences will continue, which should pave the way for a robust headset market. By 2030, I believe the wearables/glasses segment could account for 10% of Apple's sales (assuming they don't release a car), a business similar in size to Apple's Mac and iPad businesses today.

For the March quarter, Apple beat estimates and guided revenue slightly below the Street for the June quarter. Despite the soft guide, shares of AAPL traded up 2% in after-hours. I believe the stock's strength is evidence that investors are putting more weight on Apple's active device base which grew in the quarter to over 2B despite products revenue being down 5% y/y. A growing base means the Apple product flywheel is working which is the foundation for the Apple investment case to shift to a consumer staples company that should yield a higher multiple. On top of that, AI and India represent untapped opportunities for the company.

Apple reports March results on May 4th. Outside of the typical focus on iPhone and Services revenue and guidance there will be increasing attention on the company's active installed base, which grew 8% y/y in the Dec-22 quarter. A growing base means the Apple product flywheel is working. That base is the foundation for the Apple investment case to shift to a consumer staples company that should yield a higher multiple. On top of that, Apple is making meaningful progress in AI, a dynamic that is under-appreciated by investors.

In 2021, the theme of the Metaverse was top of mind for tech investors, punctuated by Facebook's fall announcement of the name change to Meta. Today, tech investors have shifted their attention to AI, making the potential of the metaverse an afterthought. I believe, over the next decade, the substance of the metaverse will live up to the 2021 hype. That belief is based in part on rising investment and competition from TikTok and Apple to enable that future.

At a time when few western business leaders visit China, Tim Cook's recent visit was the latest evidence of his skill in threading the needle to benefit Apple shareholders. I see this trip as 10% political and 90% business, and it accomplished three things; improved the image of China in the eyes of western management teams, strengthened Apple's brand among Chinese consumers, and bought time for Apple to diversify its supply chain away from China.

Ahead of the Apple annual shareholder meeting, I've taken an inventory of recent analyst and investor commentary. There are two things that I feel are missing. First, Apple's strength of product demand and favorable economics despite the macro. Second, Apple's wide diversity across product lines, sectors, geographies, and currencies, which affords investors the safety of a consumer staples company. I also have one question to ask management at the meeting: Will Apple Car see the light of day?

It's rare that I write about Apple missing a quarter. For the twenty years I've been following the company, I now count three times results have come in below expectations. As I peeled back the layers of the results along with the company's guidance, the big picture became more clear. Even though Apple's business is being negatively impacted by the supply chain and the macro, the company is maintaining innovation excellence with its core products, optionality with potential new products (AR and auto) and most importantly a loyal, engaged and growing customer base. All signs suggest sunnier days will return for Apple.

Apple announced two new chips, the M2 Pro and M2 Pro Max, that are available in the MacBook Pro and Mac Mini. I estimate that these two products account for about 6% of Apple’s total revenue, compared to Mac sales…

While I don’t want to overplay commentary from any one of Apple’s partners, I think it’s critical for investors to track TSMC updates given that Apple accounts for 25% of their revenue. TSMC produces the chips at the heart of…

Over the last six years, we’ve made a habit of offering a few predictions for the year ahead. Here’s what we’re anticipating for 2023: We believe that FAANG will outperform the S&P in 2023. In 2022, the S&P 500 is…

On November 6th, Apple announced that China’s Covid shutdowns were impacting demand for its iPhone 14 Pro/Pro Max. The announcement stopped short of providing further details on the magnitude of the impact. As the quarter progresses, we have been tracking…