Apple's current stock price doesn't reflect iOS 'stickiness,' analyst says

Posted:
in AAPL Investors edited January 2014
While Apple's recent stock woes have been driven by investor concerns over the company's slowing growth, one analyst believes the current stock price does not reflect the "stickiness" that will cause existing customers to stay with Apple.

Deutsche


Chris Whitmore of Deutsche Bank has maintained his "buy" rating for AAPL stock, because he believes existing Apple customers will remain loyal to the company's platform. That means customers are likely to upgrade to new Apple hardware in the future.

Whitmore also believes Apple will continue to grow its user base, increasing shareholder value as more customers become tied in to the ecosystem. He believes that beyond apps, Apple-only features like iMessage and FaceTime also increase the "stickiness" of iOS.

"The key underpinning of this view is the stickiness of the iOS platform and the substantial and growing investment (both time and money) Apple users place in it," he said. "Although the U.S. phone market is well penetrated, we see substantial opportunity for Apple to grow its user base in emerging markets and further monetize existing iOS users through the living room (Apple TV, additional content, etc.)."

Deutsche


Cumulative dollars spent on iTunes, accessories and the App Store are at around $54 billion as of the December quarter. That spending is also growing between 20 and 30 percent year over year.

Whitmore estimates that there are about 400 million iPhones, iPads and iPod touches in use. With 40 billion cumulative application downloads, he estimates that there are about 100 applications downloaded per device.

He believes the average iOS device has about $130 in content, including applications and iTunes Store material.

"iOS users have made a significant investment in time and dollars into the iOS platform, and as a consequence the switching costs are remarkably high," he said.

Deutsche Bank has reiterated its "buy" rating for AAPL stock with a price target of $575.
«13

Comments

  • Reply 1 of 41
    MacProMacPro Posts: 18,165member
    Well I'm 'sticking' with all my shares!
  • Reply 2 of 41
    dasanman69dasanman69 Posts: 12,979member
    Finally a analyst with some sense.
  • Reply 3 of 41
    What a sham. This is another analyst that omitted the extra week in the YOY comparison, leading to the 'disappointing earnings'. Yeah right. If most of the analysts advise buy over neutral or sell, why is AAPL not climbing to numbers that make sense? All these guys have great things to say about Apple, but out the other side of their mouths, they are saying something else.

    We should just not listen to these guys. After all, what has he said that AI readers did not already know?
  • Reply 4 of 41
    Ecosystem. Apple is the only company that truly has one. You could argue Microsoft has one but their Windows, xbox and phones don't really talk and work together as elegantly as Apple.
  • Reply 5 of 41

    Quote:

    Originally Posted by dasanman69 View Post



    Finally a analyst with some sense.


    Funny how they make sense when they tell you what you want to hear.

  • Reply 6 of 41

    Quote:

    Originally Posted by GadgetCanada View Post



    Ecosystem. Apple is the only company that truly has one. You could argue Microsoft has one but their Windows, xbox and phones don't really talk and work together as elegantly as Apple.


    Bingo! :) I've said it before, I will not buy electronic gear if it is not made by Apple. Apple's ecosystem has spoilt me! 


     


    One only has to walk around a Best Buy and it's like walking back in time to the 90's with all the blue-black plasticky electronics with fake brushed aluminum plastic. Creaky manufacturing and clunky software interfaces. 


     


    P.S. Of course, I have to have a printer (but less and less). I have a Brother MFC wireless with only one cable coming out the back, i.e., the power cable. (And, it's sitting in the closet so I don't have to look at it!)


     


    TV? Nope, don't have one. Waiting for Apple to build one. :) DSLR? Yep, would like one but the cameras are too bulky and the interfaces too clunky.


     


    Considering getting a NEST, and a BT speaker, though.


     


    P.S.S. I wish Apple would make an all in one. Cable Modem-Router-TC. Again, only one power cord coming out the back! :)

  • Reply 7 of 41
    Trust me, my wife recently moved to her 920 (amazing phone btw) and Apples stickiness really pissed her off.

    Once a telephone number is in iMessage, it stays there almost forever meaning she was having problems SMSing with friends who's phones all tried using iMessage to contact her.

    Sadly for Apple all that did was made her vent to her friends about the lock in that Apple has and how bad a company they are for it.

    Apple would much rather she left with a rosy glow about Apple, not with the memory of frustration.
  • Reply 8 of 41
    dasanman69dasanman69 Posts: 12,979member
    Funny how they make sense when they tell you what you want to hear.

    Not what I want to hear but what I've repeatedly said on here. It's not a far stretch of the imagination that anyone that's invested in a platform long enough will not leave it regardless of what the competition may bring.
  • Reply 9 of 41
    ifij775ifij775 Posts: 470member


    I've wondered how much content will a person really buy from Amazon if they are going to buy one of the cheapest tablets out there. What happens to Amazon if they only use it to download free apps and surf the web?

  • Reply 10 of 41
    How does a company such as Apple that makes so much money suddenly become worthless in a few scant months? What puzzles me is how a company that is sitting on $137 billion is "worth" less than companies that can't earn that much money in ten years. It seems I can't wrap my head around value. Netflix was able to add two million customers at $7.99 a head which results in about $16 million dollars in added revenue. How is this worth a 40% jump in share price.

    There's nothing to prove Netflix has a great future because rivals could easily cut into that growth. I tested the service as a trial and it's nice, but there's no stickiness to it at all. I watched it for a while and then cancelled. If Apple were to introduce a rival service what would happen to Netflix? Apple certainly has the money to do so and have more than enough credit card holders. I'm only saying that forecasting great futures doesn't really guarantee anything. A dollar is still worth a dollar and the more dollars you have available, the more a company should be worth.
  • Reply 11 of 41
    sensisensi Posts: 346member
    I don't trust the Deutsche Bank. My price target is still $1,111, Topeka Capital Markets' Brian White can't be that wrong. I noticed that Brian has bizarrely reduced his price target to $888 lately, I guess that he just got all new numbers to revise it down but I think he is overly-pessimistic there.
  • Reply 12 of 41
    macxpressmacxpress Posts: 4,828member

    Quote:

    Originally Posted by dasanman69 View Post





    Not what I want to hear but what I've repeatedly said on here. It's not a far stretch of the imagination that anyone that's invested in a platform long enough will not leave it regardless of what the competition may bring.


     


    This is true...as much as Windows continues to suck and not improve, people keep buying it because they've already invested in it. Its not always cheap to switch platforms, nor is it always easy. If someone has $500 worth of iOS apps, they'd lose everything by switching the Android, or Windows Phone OS. 

  • Reply 13 of 41
    lkrupplkrupp Posts: 6,954member
    Please, AI, can you stop with the anayst reports? For every positive outlook on AAPL there's a corresponding negative outlook. I thiink most of us understand that an analyst is just a glorified bullshit artist. We don't need this crap.
  • Reply 14 of 41
    nagrommenagromme Posts: 2,834member
    I much don't care what the stock does, but it's a fascinating and entertaining story to watch!
  • Reply 15 of 41
    maestro64maestro64 Posts: 4,525member


    This analysis will not make remove a single dent in the Apple trash can that the rest of the analysis has put Apple into. There are far bigger players in the market messing with the stock. I said this before, it is not hard to figure out what is happening here. It is a lot harder for the Market to bump Apple stock 10 or 20 points up from when it was $700 share, the next best thing is to short the hell out if it and create FUD. Everyone bails and the stock falls fast and hard and the same investors just made 10 or 20 or more points in 3 short months. The only question now, can those same people think it is easier to drive it back up yet again or it is just simple to kick the trash can again and make Apple look worthless.


     


    Keep in mind the investment companies doing this know that Index funds must carry apple stock and must maintain a certain % of share of Apple stock and will buy as stock drops and will sell as it goes up so maintain balance.


     


    This analysis is just playing into the game, FUD and Anti FUD the question is which one will be the stronger driving force. As we all know Apple value is not based on anything it is doing right or wrong. The same is true for any number of company who we all know are barely making money or in fact loosing money.

  • Reply 16 of 41

    Quote:

    Originally Posted by realwarder View Post



    Trust me, my wife recently moved to her 920 (amazing phone btw) and Apples stickiness really pissed her off.



    Once a telephone number is in iMessage, it stays there almost forever meaning she was having problems SMSing with friends who's phones all tried using iMessage to contact her.



    Sadly for Apple all that did was made her vent to her friends about the lock in that Apple has and how bad a company they are for it.



    Apple would much rather she left with a rosy glow about Apple, not with the memory of frustration.


    I don't see how this can happen.  My phone will switch from iMessage to SMS if the other phone turns off iMessage or even if they are in a bad reception area and iMessage can't go through.  I have many conversations where I will have a few SMS messages innner mixed with my iMessages

  • Reply 17 of 41
    dasanman69dasanman69 Posts: 12,979member
    How does a company such as Apple that makes so much money suddenly become worthless in a few scant months? What puzzles me is how a company that is sitting on $137 billion is "worth" less than companies that can't earn that much money in ten years. It seems I can't wrap my head around value. Netflix was able to add two million customers at $7.99 a head which results in about $16 million dollars in added revenue. How is this worth a 40% jump in share price.

    There's nothing to prove Netflix has a great future because rivals could easily cut into that growth. I tested the service as a trial and it's nice, but there's no stickiness to it at all. I watched it for a while and then cancelled. If Apple were to introduce a rival service what would happen to Netflix? Apple certainly has the money to do so and have more than enough credit card holders. I'm only saying that forecasting great futures doesn't really guarantee anything. A dollar is still worth a dollar and the more dollars you have available, the more a company should be worth.

    What Netflix is only viewed on iDevices? The millions of Rokus, PS3s, Xbox 360s, PCs, etc don't count for anything?
  • Reply 18 of 41

    Quote:

    Originally Posted by Maestro64 View Post


    This analysis will not make remove a single dent in the Apple trash can that the rest of the analysis has put Apple into. There are far bigger players in the market messing with the stock. I said this before, it is not hard to figure out what is happening here. It is a lot harder for the Market to bump Apple stock 10 or 20 points up from when it was $700 share, the next best thing is to short the hell out if it and create FUD. Everyone bails and the stock falls fast and hard and the same investors just made 10 or 20 or more points in 3 short months. The only question now, can those same people think it is easier to drive it back up yet again or it is just simple to kick the trash can again and make Apple look worthless.


     


    Keep in mind the investment companies doing this know that Index funds must carry apple stock and must maintain a certain % of share of Apple stock and will buy as stock drops and will sell as it goes up so maintain balance.


     


    This analysis is just playing into the game, FUD and Anti FUD the question is which one will be the stronger driving force. As we all know Apple value is not based on anything it is doing right or wrong. The same is true for any number of company who we all know are barely making money or in fact loosing money.





    Nice post. Those traders that shorted the stock have moved on. They are not coming back to APPL for awhile, especially as there are juicy targets like Netflix and Amazon around.

  • Reply 19 of 41
    Ok, iMessages appear to be increasing positively as a function of iOS installed base growth (Figure 8). I guess there's some value in that. The funny thing is, though, Figure 1 suggests that iOS users as a whole are spending less money per device (less than $140) nowadays compared to close to $180 per device in mid-2010. Yes, overall revenues may be increasing with a rising iOS installed base, but the revenue per iOS device appears to be decreasing in relation to it.

    It's difficult to tell simply by inspecting this chart, but there may be a significant inverse relationship between iOS platform adoption and the financial investments in iOS apps and media that tend to lead to platform stickiness. That's not such a great trend and appears to contradict a central point of this analyst's main conclusion, that iOS user's financial investments in the platform are increasing.
  • Reply 20 of 41

    Quote:

    Originally Posted by realwarder View Post



    Trust me, my wife recently moved to her 920 (amazing phone btw) and Apples stickiness really pissed her off.



    Once a telephone number is in iMessage, it stays there almost forever meaning she was having problems SMSing with friends who's phones all tried using iMessage to contact her.



    Sadly for Apple all that did was made her vent to her friends about the lock in that Apple has and how bad a company they are for it.



    Apple would much rather she left with a rosy glow about Apple, not with the memory of frustration.




    Here is how you fix:


    1. Turn on iPhone (hope you kept it)


    2. Turn off iMessage on the iPhone


    3. Turn off iPhone


     


    If you get frustrated with something this simple, heaven help you and your wife on Android.


    Something to remember before you sell your iPhone. Turn off iMessage!

Sign In or Register to comment.