Munster predicts Apple to outperform FAANG stocks in 2019

Posted:
in AAPL Investors edited December 2018
Longtime Apple analyst Gene Munster on Wednesday issued predictions on the 2019 tech stock landscape, saying Apple will outperform its fellow FAANG (Facebook, Amazon, Apple, Netflix and Google) investment options on the back of a growing services business and consumer-minded company ethos.

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Munster detailed expectations in a post to the Loup Ventures website, noting Apple is well positioned to lead FAANG stocks after a tumultuous 2018.

Apple is expected to rise as three major themes emerge during its current fiscal year: continued healthy returns on services, headwinds for rival FAANG firms and an indirect boost from the coming rollout of 5G wireless technology.

Like other industry insiders, Munster predicts Apple's services will play a key role in the company's future success. Comprised of the App Store, Apple Music, iTunes, iCloud, Apple Pay, digital content, licensing and other services, the catchall "Services" category has enjoyed accelerated growth over the past year. During the last quarter, for example, services revenue jumped 27 percent year-over-year to hit a new all-time high of nearly $10 billion.

Munster believes Apple's new reporting methodology, which strips out iPhone, Mac and iPad unit sales figures, will help investors focus on the booming services category.

"This greater confidence in revenue and earnings visibility should be positive for AAPL's multiple as well," Munster writes.

As Loup analyst Doug Clinton points out in today's post, 2019 will see the institution of government regulations pertaining to consumer data usage. A series of data breaches and subsequent investigative reports in 2018 led to scrutiny of aggregation and monetization practices driving revenue for firms like Facebook and Google.

In particular, Facebook's Cambridge Analytica scandal sparked concern that some tech companies are mismanaging -- or misusing -- potentially sensitive user data for corporate gain. Europe has taken steps to address the issue with its General Data Protection Regulation (GDPR) policies, a first attempt to massage data sharing guidelines into law.

The U.S. Congress is expected to discuss the issue in 2019, potentially culminating in regulations that impact the businesses of Amazon, Facebook and Google. Apple, with its very public stance on a consumer's right to privacy, should remain relatively unscathed from fallout relating to a user data crackdown.

Apple CEO Tim Cook has denounced data sharing business models like those championed by Facebook. Speaking on the topic at the 40th International Conference of Data Protection and Privacy Commissioners in Brussels in October, Cook coined the term "data-industrial complex."

"Our own information is being weaponized against us with military efficiency," Cook said, adding, "We shouldn't sugar-coat the consequences. This is surveillance. And these stockpiles of personal data only serve to enrich the companies that collect them."

Finally, Munster sees the imminent launch of 5G services as a boon for iPhone, Apple's biggest money maker. Carriers in the U.S. are currently building out the infrastructure necessary to support ultra-fast 5G speeds, with Verizon and AT&T both anticipating limited availability in early 2020.

"5G will be the biggest new iPhone 'feature' since the larger-screen iPhone 6 in 2014," Munster writes.

Verizon was first to market with a bespoke 5G Home solution in October, while AT&T flipped the switch on a standards-based mobile network in 12 cities this month.

Smartphone manufacturers are also preparing to join the 5G revolution. Verizon expects Samsung to bring a 5G-compatible handset in the first half of 2019, while Qualcomm anticipates every Android maker to field a 5G model by the end of next year.

As with past wireless standard introductions, Apple is taking a "go slow" approach and is not expected to release a 5G iPhone until 2020 at the earliest.

Munster's predictions arrive as Apple stock ticked up 7 percent in a slight rebound from steep drops attributed in part to less-than-rosy reports of weak iPhone demand. FAANG stocks in general took a beating over the past few days as a bearish December market took its toll, though the slump appeared to lift on Wednesday. AAPL hit $157.17 at the bell, up $10.34 from the previous day's close.
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Comments

  • Reply 1 of 34
    “...with military efficiency.”  It is either an oxymoron of major proportions or Cook is emphasizing the inefficiency of the efforts to use the collected data. Should the two words “military” and “efficiency” ever be juxtaposed?
    SpamSandwichjasenj1tipoo
  • Reply 2 of 34
    I'm sorry but I have to take everything this Munster character says with several grains of salt. Isn't he the one that Apple played for many years with the Apple TV TV? If he can't see through that, I'm listening else where for accurate Apple news. . He kind of became the object lesson for all other "experts" being led down a country road by manufacturers. Don't get me wrong, I'm an Apple fan, just not a fan of instant experts who don't do their  homework.
    pscooter63entropysanomewatto_cobra
  • Reply 3 of 34
    Well, I believe Apple has one or two brand new major business initiatives for 2019:  Television and possibly autonomous systems.
    If Apple succeeds at monetizing either or both of these initiatives, they will likely beat the other FAANGs.
  • Reply 4 of 34
    cgWerkscgWerks Posts: 2,191member
    Well, I believe Apple has one or two brand new major business initiatives for 2019:  Television and possibly autonomous systems.
    If Apple succeeds at monetizing either or both of these initiatives, they will likely beat the other FAANGs.
    I'd actually say opposite... if Apple keeps from getting distracted by those things.
    elijahgwatto_cobra
  • Reply 5 of 34
    I thought Gene was laughed out of his Apple analyst shtick after his Apple Television prediction went bust.
    watto_cobra
  • Reply 6 of 34
    Well, I believe Apple has one or two brand new major business initiatives for 2019:  Television and possibly autonomous systems.
    If Apple succeeds at monetizing either or both of these initiatives, they will likely beat the other FAANGs.
    I can definitly see the TV initative unfolding in 2019... but autonomous systems.... Eihhh... dont know.. maybe in 2-3 years? ...... It would be interesting to see  where their focus  will be first... thats  a pretty broad  market with countless applications. 
    Never the less ..exciting times ahead. 
    And ohhh... lets not forget AR... sweet!
    watto_cobra
  • Reply 7 of 34
    Is Apple really consumer focussed? This is a company that takes out features that are valuable to the consumer, just because it can. This is a company that has crappy quality accessories (lightning cables) that get frayed in months, but cost a bomb to replace. And this is a company that ensures that third party accessories are also pricey, because of its desire to extract its pound of flesh from every source possible (MFI program). This is a company that takes out all reasonably priced options on a regular basis, and forces its loyal customers to pay top dollar for its latest products. Apple is a company that operates from a stance of, if you want to use Apple products, pay top dollar, else we don't want you around. And at least once you pay that fancy price for entry, one would expect to be treated well - but no - even there Apple short changes you on a regular basis. Hardware flaws that necessitate product recalls and company paid fixes have clauses that ensure that any device with even slightest deviation from perfect will not qualify. And the customer is forced to pay a ridiculous price for getting the device fixed, for no real fault of his. I can live perfectly fine with a small crack on my screen - but Apple will refuse to change the battery unless I pay to get the screen fixed as well. So, a small crack, means you pay 60% of the exchange price of your phone, if you want to fix an Apple caused battery flaw. Consumer focussed, my foot!? Apple has been earning so much bad karma, that I understand fully well why there are many people who hate Apple so passionately. Earlier, there were many that used to love Apple too - but slowly many of the people who once loved Apple are disgruntled customers. I have used iPhone from the very first day since it launched - but now the thought of buying ridiculously priced products from Apple makes me cringe. Every time I hear news of Apple having troubles against Qualcomm, I rejoice. Everytime I hear news about hardware flaws forcing recalls and fixes, I rejoice. Apple is a company that deserves its day of reckoning, and hopefully it will come soon.
  • Reply 8 of 34
    Create the iPad Pro, but don't include the Apple Pencil - and even better, sell it for a ridiculous $99. Consumer friendly, indeed. Remove the 3.5mm Audio port, and convert it to lightning. Excellent way to force customers to buy MFI third party audio products. Apple wins in many ways, customer loses every possible way. For long time, phablets were too unwieldy, didn't make sense - but today, if you want the latest technology, nothing smaller than 5.8". Very customer friendly. And if those large phones bend, you are handling them wrong. Compromise on the battery to an extent where battery capacity and quality truly suck - but best response by the company is to throttle its OS, to make devices slower. Very customer friendly. By mistake Apple launched a model of the Mac Mini that was below $500 - but soon ensured that all components were soldered, not user replaceable - so if you want to upgrade, you pay Apple's ridiculous prices. Very customer friendly. And now, the cheapest Mac Mini is $700 - and still soldered parts! Apple would be the best example of a company that nickel-and-dime's its customers - except that its not nickels and dimes - its $20 minimum for anything and everything.
    wandersoelijahg
  • Reply 9 of 34
    Rayz2016Rayz2016 Posts: 4,604member
    “And you shall know them,” cried the Druid, “for they shall howl and spit from  the basement of their mothers. They shall rail against all things Apple. They shall offer sacrifices to bring pestilence to Cupertino! And you will know them! You will know our glorious saviours! For they will bring forth the end of Cook and his disbelievers. And until that day — oh glorious day! — the haters of all things Apple shall show obedience to the one true cause. They shall shun daylight and showers. They shall post messages claiming Jony Ive kicks kittens! They shall turn their backs on the unholy use of paragraphs! So it is written! So it shall be …
    mwhiteStrangeDaysanomewatto_cobra
  • Reply 10 of 34
    Sorry - make that $800 for the cheapest Mac Mini.
    elijahg
  • Reply 11 of 34
    macarena said:
    Is Apple really consumer focussed? This is a company that takes out features that are valuable to the consumer, just because it can. This is a company that has crappy quality accessories (lightning cables) that get frayed in months, but cost a bomb to replace. And this is a company that ensures that third party accessories are also pricey, because of its desire to extract its pound of flesh from every source possible (MFI program). This is a company that takes out all reasonably priced options on a regular basis, and forces its loyal customers to pay top dollar for its latest products. Apple is a company that operates from a stance of, if you want to use Apple products, pay top dollar, else we don't want you around. And at least once you pay that fancy price for entry, one would expect to be treated well - but no - even there Apple short changes you on a regular basis. Hardware flaws that necessitate product recalls and company paid fixes have clauses that ensure that any device with even slightest deviation from perfect will not qualify. And the customer is forced to pay a ridiculous price for getting the device fixed, for no real fault of his. I can live perfectly fine with a small crack on my screen - but Apple will refuse to change the battery unless I pay to get the screen fixed as well. So, a small crack, means you pay 60% of the exchange price of your phone, if you want to fix an Apple caused battery flaw. Consumer focussed, my foot!? Apple has been earning so much bad karma, that I understand fully well why there are many people who hate Apple so passionately. Earlier, there were many that used to love Apple too - but slowly many of the people who once loved Apple are disgruntled customers. I have used iPhone from the very first day since it launched - but now the thought of buying ridiculously priced products from Apple makes me cringe. Every time I hear news of Apple having troubles against Qualcomm, I rejoice. Everytime I hear news about hardware flaws forcing recalls and fixes, I rejoice. Apple is a company that deserves its day of reckoning, and hopefully it will come soon.
    Wow. That is dark. And besides the topic of the article. 

    On the topic: Munster does not know what he is writing about. Apple will have nothing to show in 5G tech this year. So how will they profit from that. The services revenue he is raving about is tightly tied to hardware sales (Apple Care, etc). So unless something drastically changes with Apples pricing, service will be growing at a limited rate. Why that will propel Apples share price is probably his secret. 
    jasenj1cgWerks
  • Reply 12 of 34
    mwhitemwhite Posts: 195member
    macarena said:
    Sorry - make that $800 for the cheapest Mac Mini.
    As the saying goes don't like it don't buy it.......
    StrangeDayswatto_cobra
  • Reply 13 of 34
    chasmchasm Posts: 1,545member
    Wow, for once* Gene Munster and I agree on something!

    *Actually, outside of his wild predictions about future Apple businesses, he’s been pretty good on judging the stock rise.
    watto_cobra
  • Reply 14 of 34
    entropysentropys Posts: 1,712member
    Munster is a wrongologist. That said, even a stopped clock can be right twice a day. There is no logical reason for the US stock market to be behaving as it had the last month, and things will turn around.  Apple will be a big part of that.
    edited December 2018 watto_cobra
  • Reply 15 of 34
    macarena said:
    Is Apple really consumer focussed? This is a company that takes out features that are valuable to the consumer, just because it can. This is a company that has crappy quality accessories (lightning cables) that get frayed in months, but cost a bomb to replace. And this is a company that ensures that third party accessories are also pricey, because of its desire to extract its pound of flesh from every source possible (MFI program). This is a company that takes out all reasonably priced options on a regular basis, and forces its loyal customers to pay top dollar for its latest products. Apple is a company that operates from a stance of, if you want to use Apple products, pay top dollar, else we don't want you around. And at least once you pay that fancy price for entry, one would expect to be treated well - but no - even there Apple short changes you on a regular basis. Hardware flaws that necessitate product recalls and company paid fixes have clauses that ensure that any device with even slightest deviation from perfect will not qualify. And the customer is forced to pay a ridiculous price for getting the device fixed, for no real fault of his. I can live perfectly fine with a small crack on my screen - but Apple will refuse to change the battery unless I pay to get the screen fixed as well. So, a small crack, means you pay 60% of the exchange price of your phone, if you want to fix an Apple caused battery flaw. Consumer focussed, my foot!? Apple has been earning so much bad karma, that I understand fully well why there are many people who hate Apple so passionately. Earlier, there were many that used to love Apple too - but slowly many of the people who once loved Apple are disgruntled customers. I have used iPhone from the very first day since it launched - but now the thought of buying ridiculously priced products from Apple makes me cringe. Every time I hear news of Apple having troubles against Qualcomm, I rejoice. Everytime I hear news about hardware flaws forcing recalls and fixes, I rejoice. Apple is a company that deserves its day of reckoning, and hopefully it will come soon.
    Wow. That is dark. And besides the topic of the article. 

    On the topic: Munster does not know what he is writing about. Apple will have nothing to show in 5G tech this year. So how will they profit from that. The services revenue he is raving about is tightly tied to hardware sales (Apple Care, etc). So unless something drastically changes with Apples pricing, service will be growing at a limited rate. Why that will propel Apples share price is probably his secret. 
    Most Services is not tied to hardware sales and several were listed in the article. They are tied to an install base of people who are willing to pay for things not looking for the bottom of the barrel. With over a Billion active users just on IOS they have lots of opportunities with people already in their ecosystem. For instance music. They did not start off as the largest merchant of music, but their base for them there with a 10th of the customers they have now. 

    There are 2 or 3 features offered by Spotify and Pandora that keep people there. When Apple finds a way to provide something similar without infringing on thier IP, they will transition to be the streaming king as well. 

    Apple usually wins where it matters because their hatters always underestimate them. 

    watto_cobra
  • Reply 16 of 34
    genovelle said:
    macarena said:
    Is Apple really consumer focussed? This is a company that takes out features that are valuable to the consumer, just because it can. This is a company that has crappy quality accessories (lightning cables) that get frayed in months, but cost a bomb to replace. And this is a company that ensures that third party accessories are also pricey, because of its desire to extract its pound of flesh from every source possible (MFI program). This is a company that takes out all reasonably priced options on a regular basis, and forces its loyal customers to pay top dollar for its latest products. Apple is a company that operates from a stance of, if you want to use Apple products, pay top dollar, else we don't want you around. And at least once you pay that fancy price for entry, one would expect to be treated well - but no - even there Apple short changes you on a regular basis. Hardware flaws that necessitate product recalls and company paid fixes have clauses that ensure that any device with even slightest deviation from perfect will not qualify. And the customer is forced to pay a ridiculous price for getting the device fixed, for no real fault of his. I can live perfectly fine with a small crack on my screen - but Apple will refuse to change the battery unless I pay to get the screen fixed as well. So, a small crack, means you pay 60% of the exchange price of your phone, if you want to fix an Apple caused battery flaw. Consumer focussed, my foot!? Apple has been earning so much bad karma, that I understand fully well why there are many people who hate Apple so passionately. Earlier, there were many that used to love Apple too - but slowly many of the people who once loved Apple are disgruntled customers. I have used iPhone from the very first day since it launched - but now the thought of buying ridiculously priced products from Apple makes me cringe. Every time I hear news of Apple having troubles against Qualcomm, I rejoice. Everytime I hear news about hardware flaws forcing recalls and fixes, I rejoice. Apple is a company that deserves its day of reckoning, and hopefully it will come soon.
    Wow. That is dark. And besides the topic of the article. 

    On the topic: Munster does not know what he is writing about. Apple will have nothing to show in 5G tech this year. So how will they profit from that. The services revenue he is raving about is tightly tied to hardware sales (Apple Care, etc). So unless something drastically changes with Apples pricing, service will be growing at a limited rate. Why that will propel Apples share price is probably his secret. 
    Most Services is not tied to hardware sales and several were listed in the article. They are tied to an install base of people who are willing to pay for things not looking for the bottom of the barrel. With over a Billion active users just on IOS they have lots of opportunities with people already in their ecosystem. For instance music. They did not start off as the largest merchant of music, but their base for them there with a 10th of the customers they have now. 

    There are 2 or 3 features offered by Spotify and Pandora that keep people there. When Apple finds a way to provide something similar without infringing on thier IP, they will transition to be the streaming king as well. 

    Apple usually wins where it matters because their hatters always underestimate them. 

    Look, I use Apple Music, buy iCloud Storage etc. but these payments pale in comparison to the average payments on Hardware per year. We are a family of four, all on Apple, from computer to Smartphone and watch. Services revenue is tiny in comparison to hardware from our family. Apple Care+ is something we only buy for select products with a decent cost benefit ratio. And those Apple Care prices have gone up quite a bit. Apple Care is about one third of Apples services revenue as most services are relatively small like Apple Pay. If that third will stagnate next year to grow 10% the rest of Apples services would need to grow 15%. Not so easy so while I agree Apples services is more than Apple Care it can be a drag to the services category if AC which is directly tied to hardware sales does not perform well. 
  • Reply 17 of 34
    macarena said:
    Is Apple really consumer focussed? This is a company that takes out features that are valuable to the consumer, just because it can. This is a company that has crappy quality accessories (lightning cables) that get frayed in months, but cost a bomb to replace. And this is a company that ensures that third party accessories are also pricey, because of its desire to extract its pound of flesh from every source possible (MFI program). This is a company that takes out all reasonably priced options on a regular basis, and forces its loyal customers to pay top dollar for its latest products. Apple is a company that operates from a stance of, if you want to use Apple products, pay top dollar, else we don't want you around. And at least once you pay that fancy price for entry, one would expect to be treated well - but no - even there Apple short changes you on a regular basis. Hardware flaws that necessitate product recalls and company paid fixes have clauses that ensure that any device with even slightest deviation from perfect will not qualify. And the customer is forced to pay a ridiculous price for getting the device fixed, for no real fault of his. I can live perfectly fine with a small crack on my screen - but Apple will refuse to change the battery unless I pay to get the screen fixed as well. So, a small crack, means you pay 60% of the exchange price of your phone, if you want to fix an Apple caused battery flaw. Consumer focussed, my foot!? Apple has been earning so much bad karma, that I understand fully well why there are many people who hate Apple so passionately. Earlier, there were many that used to love Apple too - but slowly many of the people who once loved Apple are disgruntled customers. I have used iPhone from the very first day since it launched - but now the thought of buying ridiculously priced products from Apple makes me cringe. Every time I hear news of Apple having troubles against Qualcomm, I rejoice. Everytime I hear news about hardware flaws forcing recalls and fixes, I rejoice. Apple is a company that deserves its day of reckoning, and hopefully it will come soon.
    Wow. That is dark. And besides the topic of the article. 

    On the topic: Munster does not know what he is writing about. Apple will have nothing to show in 5G tech this year. So how will they profit from that. The services revenue he is raving about is tightly tied to hardware sales (Apple Care, etc). So unless something drastically changes with Apples pricing, service will be growing at a limited rate. Why that will propel Apples share price is probably his secret. 
    Besides the topic? Maybe - just read the very first paragraph. Munster's entire reasoning is related to Apple being a consumer minded company. And I gave several points why they aren't really consumer focused, and only bottom line focused. I would consider a company like Amazon to be more consumer focused ANY DAY, compared to Apple.
  • Reply 18 of 34
    Apropos of nothing, I sure hope Apple is buying back their stock and taking advantage of the crazy volatility right now.
    edited December 2018 watto_cobra
  • Reply 19 of 34
    FolioFolio Posts: 557member
    Watch will be as large sales as iPads soon, and might have faster refresh than more expensive phones. Glasses, better AR experiences, new AirPods, and Apple media traction will distinguish next few years. As assistants like Siri become more capable and aware, and megacap giants cover more of our lives, Apple’s unique profile of security and privacy becomes a bigger attraction. (A top story of 2018 is how quickly Facebook’s home speaker flopped due to privacy/distrust.)
    watto_cobra
  • Reply 20 of 34
    gatorguygatorguy Posts: 20,618member
    Apropos of nothing, I sure hope Apple is buying back their stock and taking advantage of the crazy volatility right now.
    As of October they still had $70B committed to 2018 buybacks but so far unused. 

    buybacks

    Note: A potential stumbling block may rise from the ground at some point, with the SEC's rule that allows a program like Apple's being challenged.  Until 1982 stock buybacks like this were not legal per the SEC, considered a method of stock price manipulation. Even if a rule change doesn't happen others in the financial world are warning of a hard landing when the money for these buybacks inevitably runs out. 

    Animals eating their young comes to mind.  
    edited December 2018
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