1. Apple will be the best performing FAANG stock in 2019 (by Gene Munster)
First, we believe the theme of Apple as a Service will slowly take root in 2019. Apple’s new reporting methodology will help focus investors on revenue and earnings growth, which should advance the view of Apple as a Service. This greater confidence in revenue and earnings visibility should be positive for AAPL’s multiple as well. Second, Facebook, Google, and Amazon will be facing regulatory headwinds (see prediction #4). Apple, on the other hand, has successfully prioritized consumer and data privacy as foundational to its products. Third, in 2019, anticipation will begin to build for ways to play the 5G rollout in 2020 or 2021. 5G will be the biggest new iPhone “feature” since the larger-screen iPhone 6 in 2014.
Our prediction has a macro caveat. Apple will not be immune to any broader economic slowdown, and there’s risk to Apple’s March quarter guidance. If there’s a prolonged slowdown, it will be negative for shares of AAPL, but we would still expect Apple to “outperform” the rest of FAANG.
2. Reducing Technology Use Will Be a Top 10 New Year’s Resolution (by Doug Clinton)
In 2018, we saw an increasing awareness of the dangers of tech addiction, including mental health issues like depression and anxiety, in addition to the obvious downside of constant distraction. Greater awareness of the ills of tech addiction should bring greater action, and we expect 2019 to be a year where some segments of the population begin to rethink their technology use. We think reducing technology time will be a top 10 New Year’s resolution, but like many New Year’s resolutions, it’s likely to be broken often. We’ve started our own movement to reduce tech addiction, the Good Phone, which outlines a minimalist iPhone setup. In reality, the Good Phone movement is about helping people feel superhuman, which should be the point of all good movements — to empower those who embrace it.
3. At Least Four $10B+ Tech Unicorns IPO (by Andrew Murphy)
This may seem like a layup given Uber and Lyft have both already filed for IPOs, and there are rumors that Pinterest may soon do the same; however, the prediction isn’t just about 2019 — we think the IPO window may close over the next 18-24 months. Our view is likely consensus, and if so, it should create urgency for relatively mature venture-backed companies with large valuations to seek an IPO sooner rather than later. There are currently 260 known unicorn companies (privately-held entities valued over $1 billion), including 19 $10B+ unicorns. Many of them are more than 8 years old, and investors, early employees, and founders are all likely to be seeking liquidity given the length of the holding period. For reference, 23 unicorns went public in 2018, but only one of them was a US-based, $10B+ tech company (Dropbox). We think 2019 will see four or more brand name, US-based tech companies valued over $10B go public.
4. Legislation to Regulate Tech Company Data Usage Will Be Introduced and Passed (by Doug Clinton)
The coming year may be a challenging one for tech. In 2018, we learned that many major tech companies have severe deficiencies in how they manage user data, which raised questions about how these companies collect data and monetize it. 2018 also brought us GDPR in Europe, setting the current standard for consumer data protection policies throughout the world. The data issue seems to be one of the few that enjoys a level of bipartisan support in Washington. Senator Mark Warner published a white paper that outlines potential policy proposals for regulating tech firms. We see 2019 as a year of action in policy creation and expect to see a broad consumer data protection policy passed, although it may not be implemented until 2020 or later.
5. Apple’s New Streaming Service (by Andrew Murphy)
Where there is smoke, there’s fire — and Apple’s original content effort is billowing smoke. MacRumors has a great roundup of Apple’s original content plans here. We expect Apple to spend $1.4B on original content in 2019. Apple already has 27 shows in the works, comparable to Netflix in 2013 (its first year of original programming) when it released 13 originals. But we also expect Apple to launch a new, branded video streaming service. All of this content needs a permanent home outside of the Apple Music ecosystem (where it currently lives). Look for Apple’s new streaming service to launch in late 2019.
6. Despite Increased Competition, Tesla Will Maintain Its 50+% Market Share in the US (by Gene Munster)
2019 is shaping up to the year of the EV for the US auto market. Many automakers like GM and Volkswagen have announced wholesale shifts in strategy toward EVs, and countless more plan to roll out electrified models next year. Some notable entrants in 2019 include the Jaguar I-Pace, Audi E-Tron, Porsche Taycan, the Mini Electric, and the Mercedes eSprinter. Tesla had a banner-year in 2018 and needs to follow it up with an even better 2019 to maintain its dominant position in the all-electric market in the US. This involves the continued ramp of Model 3 production past 5,000/week and steady demand, even with increased deliveries to Europe and expansion into China. We’re looking for Tesla to produce 382k vehicles in 2019 vs. 257k in 2018, a nearly 50% y/y increase. Despite pressure from incumbent OEMs, we expect Tesla to finish 2019 with over 50% of the US EV market. We’ll measure our prediction against the InsideEVs sales scorecard.
7. Oculus Quest Will Be the First VR Headset Ready for the Mainstream (by Gene Munster)
With the spring 2019 launch of Oculus’ first all-in-one 6DoF VR headset, Quest, the mass market will, for the first time, have access to the best experiences the industry has to offer. Today, the truly compelling VR experiences are only accessible by those with a high-powered gaming computer and a cumbersome, corded headset. The Quest represents a big step in VR’s journey towards the mainstream, but another year is needed for the world find out about it. The first iPhone only sold 1.4 million units in 2007 but went on to sell 11.6 million more the following year. VR will soon have its first-generation iPhone, and we expect a similar, but likely less rapid adoption rate.
Here’s a look back at the accuracy of our predictions for 2018
- AI theme continues and artificial general intelligence takes a small step forward through Google’s “DeepMind” initiative.
- VR gets untethered but it still takes another year to take off.
- Google Home continues to gain market share in the smart speaker market.
- According to our estimates, Google Home started the year with 25% market share and will end it with 29%. Google Home once again topped our annual IQ test, correctly answering 88% of our 800 questions.
- Tesla Model 3 production ramps from 2,500 in 2017 to greater than 150,000 in 2018.
- Model 3 production saw an extraordinary ramp in 2018; we expect Tesla to end the year having produced 149,500 Model 3s.
- Major automakers announce expanded electric vehicle line-up, but autonomous driving will not ramp up until 2021.
- Bitcoin pulls back.
- iPhone ASP of $740 vs. Street at $710.
- The iPhone’s average selling price through the first three calendar quarters of 2018 was $750.
- Amazon will acquire Target.
- We recently evaluated our Amazon + Target prediction here and gave our take on why we were wrong.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.