Morgan Stanley pares AAPL target slightly to $177

JP234 said:

"The combination of the iPhone, iPad, and Mac will likely be the primary factors driving Apple's growth. As of October 18, the iPhone 14 Pro and iPhone 14 Pro Max lead times are 26.5 days."

I'd guess the services division will be the primary factor driving Apple's growth. At this point, the vast majority of Apple users are replacing existing models, not buying an iPhone/iPad/Mac for the first time. And first time buyers are what drives growth.

And what crystal ball told you that?

lkrupp said:

JP234 said:

"The combination of the iPhone, iPad, and Mac will likely be the primary factors driving Apple's growth. As of October 18, the iPhone 14 Pro and iPhone 14 Pro Max lead times are 26.5 days."

I'd guess the services division will be the primary factor driving Apple's growth. At this point, the vast majority of Apple users are replacing existing models, not buying an iPhone/iPad/Mac for the first time. And first time buyers are what drives growth.

And what crystal ball told you that?

No one has a crystal ball. It's just speculation on JP234's part.

Even Kathryn Huberty at Morgan Stanley doesn't have a crystal ball.

JP234 said:

lkrupp said:

JP234 said:

"The combination of the iPhone, iPad, and Mac will likely be the primary factors driving Apple's growth. As of October 18, the iPhone 14 Pro and iPhone 14 Pro Max lead times are 26.5 days."

I'd guess the services division will be the primary factor driving Apple's growth. At this point, the vast majority of Apple users are replacing existing models, not buying an iPhone/iPad/Mac for the first time. And first time buyers are what drives growth.

And what crystal ball told you that?

Good question. But it's not magic, it's logic. The global cell phone market is pretty well saturated with iPhones. The only way to achieve revenue GROWTH would be either sell to new customers or raise prices. Since there are few new customers, that leaves price increases. Given the competition, that's not a good path. Not for phones, tablets or Macs.

The Apple universe of services has not even come close to market saturation among Apple users, and is therefore a prime source of NEW revenue, meaning growth. In addition, the gross margin on services is MUCH higher than on hardware, making it an attractive area for new services beyond what Apple currently offers.

Fair enough?

I think you can safely ignore them, they don’t seem to know what the word guess means. 

I’m curious what you mean by the global market is  well saturated with iPhones. The smartphone market is well saturated but globally Apple has less than 30% marketshare. To me that means there is plenty of room for growth. Same with the PC space. The PC market isn’t going to make huge leaps forward but Apple has less than 20% marketshare and thus room to grow. In the tablet space they are the most dominant but still have space to find new customers. 

That said, I agree that services is the area with the most runway as there is plenty of room for new products to be brought into the Apple ecosystem. What they are doing in the financial services space is fascinating to me and I assume they are just getting started there. 

Stabitha_Christie said:

JP234 said:

lkrupp said:

JP234 said:

"The combination of the iPhone, iPad, and Mac will likely be the primary factors driving Apple's growth. As of October 18, the iPhone 14 Pro and iPhone 14 Pro Max lead times are 26.5 days."

I'd guess the services division will be the primary factor driving Apple's growth. At this point, the vast majority of Apple users are replacing existing models, not buying an iPhone/iPad/Mac for the first time. And first time buyers are what drives growth.

And what crystal ball told you that?

Good question. But it's not magic, it's logic. The global cell phone market is pretty well saturated with iPhones. The only way to achieve revenue GROWTH would be either sell to new customers or raise prices. Since there are few new customers, that leaves price increases. Given the competition, that's not a good path. Not for phones, tablets or Macs.

The Apple universe of services has not even come close to market saturation among Apple users, and is therefore a prime source of NEW revenue, meaning growth. In addition, the gross margin on services is MUCH higher than on hardware, making it an attractive area for new services beyond what Apple currently offers.

Fair enough?

I’m curious what you mean by the global market is  well saturated with iPhones. The smartphone market is well saturated but globally Apple has less than 30% marketshare. To me that means there is plenty of room for growth. 

Apple doesn't target the smartphones with <$350 market, so you have to exclude that segment for Apple. In the >$350 smartphone market, Apple probably has 50%-60% marketshare and it is very hard to increase it further with so much competition. And there are plenty of iPhone models for the users to choose from as of now. I don't think there is any gaping hole in the iPhone lineup for Apple to add more iPhone(s) beyond what they are currently selling. The current iPhone lineup is near perfect in terms of offerings at various price points.

JP234 said:

Stabitha_Christie said:

JP234 said:

lkrupp said:

JP234 said:

"The combination of the iPhone, iPad, and Mac will likely be the primary factors driving Apple's growth. As of October 18, the iPhone 14 Pro and iPhone 14 Pro Max lead times are 26.5 days."

I'd guess the services division will be the primary factor driving Apple's growth. At this point, the vast majority of Apple users are replacing existing models, not buying an iPhone/iPad/Mac for the first time. And first time buyers are what drives growth.

And what crystal ball told you that?

Good question. But it's not magic, it's logic. The global cell phone market is pretty well saturated with iPhones. The only way to achieve revenue GROWTH would be either sell to new customers or raise prices. Since there are few new customers, that leaves price increases. Given the competition, that's not a good path. Not for phones, tablets or Macs.

The Apple universe of services has not even come close to market saturation among Apple users, and is therefore a prime source of NEW revenue, meaning growth. In addition, the gross margin on services is MUCH higher than on hardware, making it an attractive area for new services beyond what Apple currently offers.

Fair enough?

I think you can safely ignore them, they don’t seem to know what the word guess means. 

I’m curious what you mean by the global market is  well saturated with iPhones. The smartphone market is well saturated but globally Apple has less than 30% marketshare. To me that means there is plenty of room for growth. Same with the PC space. The PC market isn’t going to make huge leaps forward but Apple has less than 20% marketshare and thus room to grow. In the tablet space they are the most dominant but still have space to find new customers. 

That said, I agree that services is the area with the most runway as there is plenty of room for new products to be brought into the Apple ecosystem. What they are doing in the financial services space is fascinating to me and I assume they are just getting started there. 

To grow into the existing hardware markets, Apple would have to get Windows/Android users to switch. That's not going to happen in significant numbers, due to the stranded costs. It's no longer a matter of just replacing a computer. If I have, for instance, a Dell desktop, an HP laptop, a Microsoft tablet, an Android phone and watch, that's going to be thousands of dollars for the hardware alone. Then there's the learning curve. 

Nope, going forward, it's the services that will fuel growth. Existing Apple customers have barely tapped the available services, and more are coming all the time. I'm expecting the new Apple One subscription to take off like a rocket. It's a true bargain compared to assembling the pieces separately.

Great point about the financial services side, though. That's effectively a license to print money!

Data would suggest otherwise. Over the last few quarters 50% of Mac sales have been going to people switching to the platform. Or according to Apple that is the case and I have no reason to think they made that up. I don’t recall if they have offered the same detail for iPad and iPhone but the sunk costs there are far lower than a PC.