Shares of Apple don't reflect significance of iPhone Upgrade Program, Piper Jaffray says

Posted:
in AAPL Investors edited October 2015
Apple's newly launched iPhone Upgrade Program will drive handset owners to upgrade their devices even faster than before, adding to the company's bottom line over the next four-plus years and pushing its stock higher, investment firm Piper Jaffray believes.




Though investors are aware of the iPhone Upgrade Program and its benefits to Apple, the potential for it is not yet priced into shares of AAPL, analyst Gene Munster said in a note to investors on Thursday, a copy of which was provided to AppleInsider.

Specifically, Munster estimates that the current upgrade cycle for an iPhone user in the U.S. is about 22 months, but he sees that shortening to an average of about 15 months by calendar year 2018. He believes the new upgrade program could push iPhone sales higher by 5 to 7 percent per year for each of the next four years and beyond.

Munster's estimates assume that about 10 percent of iPhone customers are currently annual upgraders, but he sees that number swelling to as many as 75 percent of iPhone owners by the end of 2018.

"We do not feel shares of AAPL reflect the significance of this trend," he said.

The effects of Apple's plan are already being seen, as Munster believes the move prompted U.S. carrier Verizon to begin offering an annual upgrade option. And he believes that it will have an even greater impact on Apple's revenue once the iPhone Upgrade Program begins to roll out internationally.

Another long-term benefit of the program, in Munster's view, is offering more year-old, refurbished handsets available to purchase. Given that the iPhone has extremely high user retention rates, he believes selling more affordable refurbished handsets will rope more customers into the Apple ecosystem.

Piper Jaffray remains one of the most bullish firms covering AAPL stock, with an "overweight" rating and a price target of $172.
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Comments

  • Reply 1 of 44
    knowitallknowitall Posts: 1,232member
    Or Apple could make the iPhone more affordable, for example only two times the manufacturing cost (instead of three times), but I guess the shareholder won't let them do that.
  • Reply 2 of 44
    dcgoodcgoo Posts: 211member



    Hey, it worked for me. I was going to wait. But the AUP inspired me to reserve for day 1.  Unlocked, annual upgrades, Applecare?  A no brainer IMO. 

  • Reply 3 of 44
    solipsismysolipsismy Posts: 5,099member
    knowitall wrote: »
    Or Apple could make the iPhone more affordable, for example only two times the manufacturing cost (instead of three times), but I guess the shareholder won't let them do that.

    So they could sell just as many as they can make Right now while generating less revenue and profit? How does that help the stock value?
  • Reply 4 of 44
    bobschlobbobschlob Posts: 1,074member

    Nobody cares.

    After the outrageous unjustified butchering of 2012-13, and now this; I won't be back. It's not worth it.

    All you get is the opportunity to see that, for the most profitable company on earth, the stock isn't worth a shit if Wall Street deems it so.

    It's only worth what the machine will pay.

  • Reply 5 of 44
    hmmhmm Posts: 3,405member
    Quote:

    Originally Posted by sog35 View Post

     

      Nor does Cook give hints that they would be willing to take the company public.

     


    Take the company public seems like an error. Taking the company private is virtually impossible. What investment groups could really raise hundreds of billions of dollars to pull it off and what would be the point? You would have fewer liquidity options at that point, and now its owners would have far more clout.

  • Reply 6 of 44
    dasanman69dasanman69 Posts: 12,976member
    sog35 wrote: »
    knowitall wrote: »
    Or Apple could make the iPhone more affordable, for example only two times the manufacturing cost (instead of three times), but I guess the shareholder won't let them do that.

    manufacturing cost is only a fraction of the cost to build an iPhone.  What about R&D?  What about admin salaries?  What about the cost of developing and maintaining iOS and the App store and other services?  What about the costs of retail stores?  Retail store employees?  Cost to buy and develop TouchID?  Cost to develop Apple Pay? AppleMusic?  

    Apple's company wide profit margin last year was only 21%.   That is a FACT.

    Your number of 3x manufacturing cost is a made up number.

    Says the king of made up numbers. :lol:
  • Reply 7 of 44
    lkrupplkrupp Posts: 6,784member
    Quote:

    Originally Posted by knowitall View Post



    Or Apple could make the iPhone more affordable, for example only two times the manufacturing cost (instead of three times), but I guess the shareholder won't let them do that.



    Get off the “cheaper” bandwagon will you. It doesn’t work, it doesn’t fix things. All it does is sell more phones for less money and is a zero sum game as far as profit is concerned. A cheaper iPhone means you have sell tons more of them just to stay where you are. What part of this does the cheap crowd not understand?

  • Reply 8 of 44
    Quote:

    Originally Posted by sog35 View Post

     

     

    Technically there is way for Apple to go private and still have thousands of shareholders.

     

    The SEC rule is that a private company can only have up to 2,000 shareholders of record.  But most public companies don't record shareholders by individual.  For example all individual shareholders who own shares in a Scottrade account are counted as ONE SHAREHOLDER of record.  Scottrade is counted as one shareholder of record even though it may have thousands of individual shareholders.  So how many investment houses are there?  Scottrade, TD, BOA, Merily Lynch, ect.  Probably less than 2,000.  And if it was more than 2,000 it would be no big deal to combine those on the record.

     

    Second Apple could go private and remove their stock from public trading even if they have MORE than 2,000 shareholders.  They would still need to file quarterly financials with the SEC but they could remove the stock from trading on the NYSE.  

     

    So technically Apple could go private even with tens of thousands of shareholders.

     

    Next is funding. Who has $400 billion to buy Apple?  The shareholders do.  They could simply convert their public shares to private shares held in a trust.  This is no big deal.  Today you can already buy private equity shares from a brokerage through a fund.  And those who want to sell can at a 40-50% premium.  IMO, very few would sell and Apple could easily get the $100 billion to buy out the few who want to sell.


    This has got to be the worst idea I have seen here.  All you are doing is removing liquidity and it would not really be legal to have more then 2000 shareholders via using brokers to be subowners.  All you plan would do is remove the obvious market price.  

     

    If you want to sell your shares for more then the market things they are worth you can do that now anyhow.  Just put in a sell order at a fixed price.  Of course it will just sit there until that price is reached.  

     

    Just let the AAPL profits keep rolling in.  If the cash per share does not move Wallstreet, BUYBACKS are far better then dividends for moving the price up long term.  

  • Reply 9 of 44
    jfc1138jfc1138 Posts: 3,090member
    Quote:

    Originally Posted by knowitall View Post



    Or Apple could make the iPhone more affordable, for example only two times the manufacturing cost (instead of three times), but I guess the shareholder won't let them do that.



    They offer a full range of "affordable" iPhones right now.

  • Reply 10 of 44
    xcalixcali Posts: 1member
    Stock reflects future cash flows, and tablet and smart phone segment is maturing. You can easily see this even with Apple's decreasing increments in sales. Let alone Samsung, HTC and others already going down in sales. Without any new initiatives, Apple stock could easily go down 30%
  • Reply 11 of 44
    knowitallknowitall Posts: 1,232member
    Nothing new here, shares don't reflect anything.
    It's a gamblers market.
  • Reply 12 of 44
    sog35 wrote: »

    Shareholders are literally being robbed of $200 BILLION in share value.  That is a crime.  Apple needs to act. If Apple does not act many shareholders will just give up and sell and the price will drop even more. If Apple continues to allow manipulators to rape its stock price eventually investors will avoid it like the plague no matter how profitable they are. 

    But how exactly is Wall Street manipulating the stock. Not disputing as such. Just intrigued to know what it is they do as I've heard so much about apple being manipulated but not aware of how physically this happens ? How is no one at Wall Street found accountable. Surely investigations are done
  • Reply 13 of 44
    knowitallknowitall Posts: 1,232member
    lkrupp wrote: »

    Get off the “cheaper” bandwagon will you. It doesn’t work, it doesn’t fix things. All it does is sell more phones for less money and is a zero sum game as far as profit is concerned. A cheaper iPhone means you have sell tons more of them just to stay where you are. What part of this does the cheap crowd not understand?

    It has to do with the 'real' (or fair) value of something, no one likes a ripoff.
    In the long run this will harm Apple, because they make way to much profit.
    If you buy a 'Tesla' for example you know it isn't a ripoff and this will benefit the brand enormously.
  • Reply 14 of 44
    knowitallknowitall Posts: 1,232member
    sog35 wrote: »
    What about private equity?  Would not agree that reflects more what something is worth?

    A private company is not open to this type of manipulation.  If Apple was a private company it would be worth between $800 billion to a trillion dollars today.

    Yes it is a gamblers market which is ridiculous.  My guess is that 90% of Apple shareholders are not gamblers or day traders or MACHINES.  Almost 40% of Apple shares are owned by individuals.  Probably another 50% is owned by mutual funds and index funds.  So only about 10% is 'owned' by these traders and algo machines.  Yet this 10% can control the stock price because they can buy and sell the same shares to another algo machine MILLIONS OF TIMES a day.  That type of manipulation would be impossible in a private company.

    This isn't the only reason it's a gambler market, people try to manipulate it all the time by creating fake news stories about Apple and it's suppliers.
    This alone makes it totally unpredictable.
  • Reply 15 of 44
    sog35 wrote: »



    Shareholders are literally being robbed of $200 BILLION in share value.  That is a crime.  Apple needs to act. If Apple does not act many shareholders will just give up and sell and the price will drop even more. If Apple continues to allow manipulators to rape its stock price eventually investors will avoid it like the plague no matter how profitable they are. 

    How are Apple actually being manipulated though. Not disputing it just unclear as to how Wall Street supposedly does this. Who is behind it what do they do and how is this manipulation not discovered and addressed. Surely it wouldn't be allowed as its corruption ?
  • Reply 16 of 44
    dcgoo wrote: »

    Hey, it worked for me. I was going to wait. But the AUP inspired me to reserve for day 1.  Unlocked, annual upgrades, Applecare?  A no brainer IMO. 

    Sign me up for two.
  • Reply 17 of 44
    There is no care. Your time horizon is way too short. If Apple has no growth for the next 10 years the stock would still double as cash flow will exceed the current market cap. That's why it's a no brainer. Not because of what the stock will do this year or next. Now assume 10% growth and Apppe will likely triple in 10 years. How is that a bad investment?
  • Reply 18 of 44
    512ke512ke Posts: 782member

    Apple stock is a winner over time. You have to hold the stock for 5 years minimum. It's a great long term investment that pays dividends. 

  • Reply 19 of 44
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by sog35 View Post

     

    Many holders of Apple stock sell call options contracts.  


    Sell calls, buy puts, start false rumors of doom, rinse and repeat.

  • Reply 20 of 44
    It's simple math. If Apple continues with their current cash flow they would effectively buy back every single share.in the next ten years. Business 101. The only argument you can make is that Apple sales will plummet over the next ten years. If you believe that, then yes you should sell. Otherwise, quit crying and step up to the plate.
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