Investors should worry less about Apple product cycles, focus on loyal customer base, Piper Jaffray

Posted:
in AAPL Investors edited February 2015
While most investors are focused on Apple's annual product cycles and growth, Piper Jaffray sees a new category of shareholders emerging, focused on the power of the platform and a loyal customer base.




Analyst Gene Munster shared his theory this week in a new note to investors, a copy of which was provided to AppleInsider. The comments were made in light of the fact that he believes shareholders anticipating Apple's December 2014 earnings report will focus on the company's March quarter guidance.

That focus on the future --?"looking to the next episode," as Munster put it -- is why the analyst is instead pushing the idea that investors should consider the strength of Apple's platform and customer loyalty.
Gene Munster believes most AAPL investors are focused on product cycles, but should consider the 'stickiness' of Apple's platform.
"Our opinion is that companies that build annuity businesses that sell more products to customers over time should perform well over the long-term," he said. "While the stock may have different phases in performance quarter to quarter and year to year, we believe the concept of the long-term value in the platform is real."

Munster did admit that "product cycle investors," as he calls them, are likely concerned about tough comparisons coming in late 2015 and early 2016. With huge expectations for the iPhone 6 launch, Munster said it's likely that some investors will be concerned whether the iPhone can grow at all next year.

"We feel that single digit growth is reasonable but that level of deceleration will not be comforting to product cycle investors," he said.

For the just-concluded December quarter, Munster predicts Apple sold 65 million iPhones, which is on the low end of investor expectations generally ranging from 65 million to 69 million. Looking forward to the March quarter, he said Wall Street expectations are generally for around 51 million iPhone units to be sold.

Piper Jaffray has maintained its "overweight" rating for AAPL stock, with a price target of $135 per share.
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Comments

  • Reply 1 of 29
    pazuzupazuzu Posts: 1,728member
    Your loyal customer base is only as good until you have a bomb- remember Windows Vista.
  • Reply 2 of 29



    Agree - we don't need a new version of OS X every year.  A working version of OS X would be nice though.

     

    Just saying.

  • Reply 3 of 29
    jason98jason98 Posts: 749member

    Yeah right. Blackberry customer base is all but a proof.

     

    And Sony used to have a lot of loyal users too.

     

    PS:

    Apple better fix Siri and add more languages to it. For most of the people in the world where iPhone is sold it is still unusable.

  • Reply 4 of 29
    Look...it's a Munster...be vewy quiet or you'll scare him away...
  • Reply 5 of 29
    jason98 wrote: »
    Yeah right. Blackberry customer base is all but a proof.

    And Sony used to have a lot of loyal users too.

    PS:
    Apple better fix Siri and add more languages to it. For most of the people in the world where iPhone is sold it is still unusable.

    Siri works fine. And they're working on it for international users.
    Look...it's a Munster...be vewy quiet or you'll scare him away...

    I'm surprised he didn't mention the TV set! Gene must be slipping.
  • Reply 6 of 29
    solipsismysolipsismy Posts: 5,099member
    johnnash wrote: »

    Agree - we don't need a new version of OS X every year.  A working version of OS X would be nice though.

    Just saying.

    jason98 wrote: »
    Yeah right. Blackberry customer base is all but a proof.

    And Sony used to have a lot of loyal users too.

    He's not saying investors shouldn't be concerned if Apple releases a string of duds, since that clearly will erode the customer base. He's saying notto base your investment on how often Apple is releasing new products or product categories. As we read everyday (mostly from certain types of posters on these forums) there are people that believe if Apple isn't doing something revolutionary and groundbreaking every single fucking day of the year they will say Apple is doomed.
  • Reply 7 of 29
    512ke512ke Posts: 756member
    People didn't have mobile phones not THAT long ago. The pace of techno change makes the sector lucrative but hazardous for companies. Last year's dominant brands can become mostly irrelevant. AOL you've got mail! Blackberry! Nokia! Sony Walkman! Napster! MySpace! Friendster!

    The truly amazing thing about Apple is the company's ability to stay relevant and meaningful and exciting over time.

    They've proven again and again they've got superior creativity, design, manufacturing and marketing. Do you want to bet against that? I don't. I trust that despite some inevitable volatility AAPL will gain value over time.

    I have way more faith in Apple than I do in Google personally. Google is awesome but Apple is the top tech company period.
  • Reply 8 of 29
    512ke wrote: »
    People didn't have mobile phones not THAT long ago. The pace of techno change makes the sector lucrative but hazardous for companies. Last year's dominant brands can become mostly irrelevant. AOL you've got mail! Blackberry! Nokia! Sony Walkman! Napster! MySpace! Friendster!

    The truly amazing thing about Apple is the company's ability to stay relevant and meaningful and exciting over time.

    They've proven again and again they've got superior creativity, design, manufacturing and marketing. Do you want to bet against that? I don't. I trust that despite some inevitable volatility AAPL will gain value over time.

    I have way more faith in Apple than I do in Google personally. Google is awesome but Apple is the top tech company period.

    I have more faith in Microsoft than I do Google. I see MS transitioning away from being a consumer company and becoming more like IBM, but IBM still is very profitable and relevant in the enterprise space.

    In the end, Google's an ad company with limited future potential.
  • Reply 9 of 29
    paul94544paul94544 Posts: 1,027member
    Quote:
    Originally Posted by TheWhiteFalcon View Post





     but IBM still is very profitable and relevant in the enterprise space.



     

    Have you been reading the news on IBM, I believe they are in trouble, worst performing stock on the DOW in 2014. 2015 will make or break IBM most likely

  • Reply 10 of 29
    rs9rs9 Posts: 68member
    The problem is not the loyal Apple Customer Base, but rather the shortsightedness of Wall Street which continues to ding Apple with the outlandish numbers(estimates) they come up with they; that may not be reached. Quite frankly Wall Street has set a ceiling of around 67 million Iphones sold this quarter. If Apple sells 66.5 million its considered a failure. If Apple sells 70 million, during the next product cycle Wall Street will be looking for 72 million units(plus/minus) units sold.
  • Reply 11 of 29
    rogifanrogifan Posts: 10,669member
    All one has to do is look at Touch ID and Apple Pay to see the difference between Apple and other companies. These aren't half baked ideas just thrown out there to make Apple look like its being innovative. Even with ?Watch they're making sure there will be plenty of 3rd party developer support upon launch so when the Watch does ship it will actually be useful. Apple doesn't get enough credit for the fact they ship fully baked products not half assed stuff that gets thrown over to OEMs to try and do something useful with.
  • Reply 12 of 29
    Quote:

    Originally Posted by johnnash View Post

     



    Agree - we don't need a new version of OS X every year.  A working version of OS X would be nice though.

     

    Just saying.




    I also agree.  I would prefer an OS that changes less frequently.  I prefer incremental change and improvement rather than change fore the sake of change.  I suspect that a lot of others prefer commonality and standardization and will embrace innovation only when it produces a truly significant improvement.  Preview is a good example.  The markup tools (EG. The ability to form a box around a selection) are not as simple to use in the current version compared to the last.

  • Reply 13 of 29
    rogifanrogifan Posts: 10,669member
    rs9 wrote: »
    The problem is not the loyal Apple Customer Base, but rather the shortsightedness of Wall Street which continues to ding Apple with the outlandish numbers(estimates) they come up with they; that may not be reached. Quite frankly Wall Street has set a ceiling of around 67 million Iphones sold this quarter. If Apple sells 66.5 million its considered a failure. If Apple sells 70 million, during the next product cycle Wall Street will be looking for 72 million units(plus/minus) units sold.

    And if Apple hits 70M then it's D&G because those are impossible comps and the premium smartphone market is saturated so Apple has to get into a race to the bottom with everyone else.
  • Reply 14 of 29
    Quote:

    Originally Posted by Paul94544 View Post

     

    Have you been reading the news on IBM, I believe they are in trouble, worst performing stock on the DOW in 2014. 2015 will make or break IBM most likely


    What trouble?  They're only canning 100,000+ employees.  It can't be all that bad.  In fact, as soon as investors heard of the IBM layoffs of useless humans, the stock jumped up.  Investors love to hear about layoffs because they believe employees simply waste too much money that could go into investor's pockets.  If IBM fires more employees the stock will go even higher.  Fire 'em all and give them a nice long rest for the new year.

     

    /s

  • Reply 15 of 29
    Quote:

    Originally Posted by SolipsismY View Post



    He's not saying investors shouldn't be concerned if Apple releases a string of duds, since that clearly will erode the customer base. He's saying to base your investment on how often Apple is releasing new products or product categories. As we read everyday (mostly from certain types of posters on these forums) there are people that believe if Apple isn't doing something revolutionary and groundbreaking every single fucking day of the year they will say Apple is doomed.

    Exactly. Munster is right on this one.

     

    Moronic posts comparing Apple to BB, Sony or Vista completely miss the point. Moreover, they miss the basic fact that no one in the consumer space has an ecosystem -- something that makes your customers stick around -- like Apple's (although, Microsoft has the same advantage in the corporate world).

  • Reply 16 of 29
    mactacmactac Posts: 315member

    Of course the non upgrade mini upgrade isn't finding comfort with many of the loyal customer base.

  • Reply 17 of 29
    Quote:
    Originally Posted by anantksundaram View Post

     

    Exactly. Munster is right on this one.

     

    Moronic posts comparing Apple to BB, Sony or Vista completely miss the point. Moreover, they miss the basic fact that no one in the consumer space has an ecosystem -- something that makes your customers stick around


     

    Oh really? Didn't BB have an ecosystem of their own? Like email and messaging system pretty much all top Fortune companies embraced. Did not help them much.

  • Reply 18 of 29
    paul94544 wrote: »
    Have you been reading the news on IBM, I believe they are in trouble, worst performing stock on the DOW in 2014. 2015 will make or break IBM most likely

    If IBM puts itself up for sale, Apple will definitely buy them.
  • Reply 19 of 29
    jason98 wrote: »
    Oh really? Didn't BB have an ecosystem of their own? Like email and messaging system pretty much all top Fortune companies embraced. Did not help them much.

    Actually, that did help BB nee RiM for quite awhile because of the backend investments and ecosystem already incorporated, but it was not enough, especially when Apple was pushing into the consumer space which then quickly grew into the Enterprise space as a lower-cost alternative to BES in an environment where companies were moving to allow employees to use their own devices.

    Also, BB didn't have multiple device categories that were all linked together with a common ecosystem and Universal apps. One of the reasons the iPad is so successful is you that app you love so much on your iPhone may already be idealized for the iPad, too. Or vice versa if you're entry into iDevices is the iPad.
  • Reply 20 of 29
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by SpamSandwich View Post

     
     

    If IBM puts itself up for sale, Apple will definitely buy them.

    Every publicly traded company is already up for sale. I think Apple is going to stick with buying Apple in the near term.

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