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ASP increases, blurred lines over iPad as computer are giant positives for AAPL

The Apple special event went "largely as expected," claims Loup Ventures analyst Gene Munster, but announcements made during the presentation, such as the launch of the iPad Pro, were "incrementally positive" to Apple's overall story.

The 2018 iPad Pro demonstrated on-stage by Adobe

The 2018 iPad Pro demonstrated on-stage by Adobe


In a blog post following the event, Munster suggests the updates to the iPad Pro line are "an indication of the blurring the lines between the iPad, the Mac, and the iPhone." Additions ported across from the iPhone like Face ID, as well as full Adobe apps, Xbox-level graphics, and a USB-C port that is more of a Mac trait makes the iPad Pro categorization as a tablet "more ambiguous."

The line-blurring may help Apple increase its addressable market by producing a lower entry point for owning a full-fledged "computer," Munster suggests.

It is estimated that the products announced during the vent will account for approximately 8 percent of Apple's total revenue for the full year 2018, with an expectation of a similar percentage share of revenue the following year. The full unit growth estimates for 2019 remain unchanged, however as Mac and iPad units are tipped to grow 1 percent over the year.

"This does not take away from the fact that the products announced today represent Apple's impressive speed and depth of constant innovation," advises Munster. "The company continues to push the boundaries of consumer tech products."

The trend of increasing the Average Selling Price (ASP) is said to continue with the latest offerings, with the entry-level MacBook Air's price increasing 20 percent to $1,199, the iPad Pro by 23 percent to $799, and the Mac mini by 60 percent. "We are leaving our ASP estimates unchanged to layer in a level of conservatism," the firm writes.

Apple's retail efforts are declared to be an "underappreciated competitive advantage," with 70,000 employees versus Microsoft's second-largest technology retail footprint of 6,000 employees. The addition of 60 new Today at Apple sessions are said to further the number of experiences offered at retail stores.

For Thursday's quarterly financial results, Munster suggests the results could serve to validate three of four pillars in a new paradigm of "Apple as a Service." He expects the focus of the call to be around the iPhone ASP for 2019, which Munster predicts will be $791 compared to Wall Street's consensus of $756, with Apple thought to be finding new ways to make more money from iPhones while long-term growth slows to low single digits.

Services growth of 20 percent are suggested, in line with Street expectations but down from the previous quarter's 28 percent growth. A return in capital of around $25 billion is predicted, which would support a three-year path to "net cash neutral," ahead of the Street's expectations of five year or more.

Deemed to be a "non-event," the iPhone units of 48.1 million against Street predictions of 47 million will apparently be evidence of the iPhone becoming a stable business, and "performing more like software than hardware."