AAPL - Apple Inc.

[fareastwarriors]

Happy $2 trillion!

[rkbabang]

They say the first trillion is the hardest.

[Jurgis]

1$ trillion, 2$ trillion, pretty soon you're talking real money.

[Liberty]

[Jurgis]

I think I posted on BRK thread about AAPL valuation. Considering trimming down again, so looking at it again.

 

Starting with 80B FCF TTM, if AAPL manages to grow 10% annually for next 10 years, and assuming discount rate of 0.09% (9% annual return), 2T market cap is justified. M* expects 7% growth rate. Assuming that, the return drops to 6% or so.

 

It's not hugely overvalued. But yeah, at this size growing 10% for 10 years might be tough unless they hit another jackpot huge market outside iPhone.

[RadMan24]

I think I posted on BRK thread about AAPL valuation. Considering trimming down again, so looking at it again.

 

Starting with 80B FCF TTM, if AAPL manages to grow 10% annually for next 10 years, and assuming discount rate of 0.09% (9% annual return), 2T market cap is justified. M* expects 7% growth rate. Assuming that, the return drops to 6% or so.

 

It's not hugely overvalued. But yeah, at this size growing 10% for 10 years might be tough unless they hit another jackpot huge market outside iPhone.

 

Buying at current levels, not so much upside.

 

Holding at current levels, up or down 20% really doesn't impact you that much.

 

Selling at current levels, leaves you with cash and optionality, but not much else to buy, at the moment.

[johnny]

I'm #FreeFortnite and all that, but it's still TINA: there is no 3rd mobile platform and nobody's gonna build one (anytime soon). Well, maybe Amazon again on top of Fire tablets++. Maybe FB. But even these are unlikely.

 

So unless antitrust is persuaded that Apple + Google == duopoly that should be forced to provide access on reasonable terms, nothing's gonna happen. Or in other words, Epic Games & others who try to rebel will be f%^ked. IMO you can rebel when consumers have an alternative and can leave for whatever alternative platform. If they can't, rebelling is really pretty much just antitrust play.

 

Two issues: the first is, this exact same reasoning applied to a discussion of Windows in the 90s. Maybe you are right and there’s just no chance of the phone software world being disrupted meaningfully. Then the disruption will come in the next format change—Facebook already -has- a VR operating system, in a sense, and is currently working on a much more “OS” like attack on the same concept.

 

If Apple fully alienates all developers and partners with its behavior today, it will make it quite a bit easier for another player to capture a meaningful amount of the next market opportunity. Apple knows this, which is why they’ll do everything they can to “bridge” iOS, as a platform, into its next platforms. Microsoft tried the same thing with mobile, by the way, which is a critical reason why Microsoft failed miserably.

 

Second, even if they are structurally very strong and able to dictate terms in mobile, what’s going on is a Schelling point moment—the coordination problem is being solved, non-collusively, and everybody with the ability to push is now making the push simultaneously. It isn’t just Epic, or just a few smaller Apple devs, its everybody—including NYT and WSJ.

 

I’ll note that, while Google also imposes a similar cut on transactions they intermediate, they do not insist on corralling all of the platform economics into their intermediation with nearly the aggression of Apple. Remember, in iOS if your app suggests that some digital content can be purchased by going to your website, your app will be removed from the App Store. This is egregious, disproportionately abusive (Amazon doesn’t have to tell you how to get to their website to buy audiobooks, because Amazon), and more universally understood as such.

 

I don’t have super high confidence in this prediction, but I think the 30% is simply not long for this world, despite your accurate read that there’s really no fundamental, nuts-and-bolts, economic reason why it has to disappear. Apple has already (as revealed, contrary to regular lies from management), caved in selective circumstances on the 30% rake. Now a lot of firms that perhaps didn’t realize they could push for it are going to (WSJ, NYT). The more they cave, the more unstable the 30% norm becomes, and the more political and brand vulnerability the firm has from only insisting on imposing that tax on the developers and companies least able to bear the costs.

 

And if Apple had not spend years backing themselves into the “look at YoY service revenue growth” narrative, they’d recognize that it is actually in the long-term interests of the company to have done this a year ago. But instead, they’re going to do an incredible amount of reputational damage fighting to keep it alive as long as possible.

[rkbabang]

I'm #FreeFortnite and all that, but it's still TINA: there is no 3rd mobile platform and nobody's gonna build one (anytime soon). Well, maybe Amazon again on top of Fire tablets++. Maybe FB. But even these are unlikely.

 

So unless antitrust is persuaded that Apple + Google == duopoly that should be forced to provide access on reasonable terms, nothing's gonna happen. Or in other words, Epic Games & others who try to rebel will be f%^ked. IMO you can rebel when consumers have an alternative and can leave for whatever alternative platform. If they can't, rebelling is really pretty much just antitrust play.

 

Two issues: the first is, this exact same reasoning applied to a discussion of Windows in the 90s. Maybe you are right and there’s just no chance of the phone software world being disrupted meaningfully. Then the disruption will come in the next format change—Facebook already -has- a VR operating system, in a sense, and is currently working on a much more “OS” like attack on the same concept.

 

If Apple fully alienates all developers and partners with its behavior today, it will make it quite a bit easier for another player to capture a meaningful amount of the next market opportunity. Apple knows this, which is why they’ll do everything they can to “bridge” iOS, as a platform, into its next platforms. Microsoft tried the same thing with mobile, by the way, which is a critical reason why Microsoft failed miserably.

 

Second, even if they are structurally very strong and able to dictate terms in mobile, what’s going on is a Schelling point moment—the coordination problem is being solved, non-collusively, and everybody with the ability to push is now making the push simultaneously. It isn’t just Epic, or just a few smaller Apple devs, its everybody—including NYT and WSJ.

 

I’ll note that, while Google also imposes a similar cut on transactions they intermediate, they do not insist on corralling all of the platform economics into their intermediation with nearly the aggression of Apple. Remember, in iOS if your app suggests that some digital content can be purchased by going to your website, your app will be removed from the App Store. This is egregious, disproportionately abusive (Amazon doesn’t have to tell you how to get to their website to buy audiobooks, because Amazon), and more universally understood as such.

 

I don’t have super high confidence in this prediction, but I think the 30% is simply not long for this world, despite your accurate read that there’s really no fundamental, nuts-and-bolts, economic reason why it has to disappear. Apple has already (as revealed, contrary to regular lies from management), caved in selective circumstances on the 30% rake. Now a lot of firms that perhaps didn’t realize they could push for it are going to (WSJ, NYT). The more they cave, the more unstable the 30% norm becomes, and the more political and brand vulnerability the firm has from only insisting on imposing that tax on the developers and companies least able to bear the costs.

 

And if Apple had not spend years backing themselves into the “look at YoY service revenue growth” narrative, they’d recognize that it is actually in the long-term interests of the company to have done this a year ago. But instead, they’re going to do an incredible amount of reputational damage fighting to keep it alive as long as possible.

 

Some things here to note.  One is that I think you are correct that iPhone/iOS has won the phone wars every bit as much as Microsoft won the PC-OS wars and that what comes after iPhone will not be a phone, but something else.  Two is that even though cell phones took over personal computing for the most part and Microsoft has not been a major player in that, Microsoft has done quite well for investors nonetheless.

 

[johnny]

Microsoft did do very well in the alternate business lines, for sure.

 

The thing is, one of those lines was Office, which already existed and was demonstrably valuable, standalone, before the mobile shift. In fact, the critique of Microsoft a decade ago was that they were essentially undermining the economics of the Office business in an attempt to extend the Windows platform monopoly.

 

This a total contrast to what we see in Apple: they undermine the experience of iOS (either using it or developing for it) in an attempt to financially jump-start some otherwise uneconomic business lines that have no independent traction or value.

 

As I've said multiple times here, 100% of Apple's revenue growth, and substantially all of it's net earnings are completely derivative of the iPhone. There is no other actual business they've developed. They are in the iPhones and iPhone accessories business, and that is a wonderful business to be in, but there is no indication whatsoever that they have a meaningful follow-up, and at >$2 Trillion dollars, I think you're paying a a price that implies total certainty that there's another big success in the works, rather than just responsible management of the mature iPhone.

 

Just two years ago, you had this stock at a valuation that basically required no growth and no new products. It was very easy to look at all of their service nonsense as pathetic stock price management and funding hobby interests of the EVPs. But the valuation has now given them full credit for these hobbies, as if they're truly cash-flowing independent businesses. Which they aren't, and which they almost certainly will never be.

[johnny]

Another grain of sand that I think demonstrates we're somewhere near a tipping point here: https://9to5mac.com/2020/08/21/apple-asks-wordpress-to-support-in-app-purchases/

 

In another chapter of App Store issues, WordPress founder Matt Mullenweg shared on Twitter today that the reason there haven’t been any updates for the WordPress iOS app is that Apple won’t approve them until the app includes in-app payment options. The strange thing is, the WordPress app doesn’t sell anything.

 

This is the sort of thing that will be 'taken care of' amicably. But the point is that, 5 years ago, this wouldn't have been a story with any traction in the Apple community, and it wouldn't be getting any serious commentary from people in that world. It would have just been something unhinged Android psychos would be screeching about while Apple people rolled their eyes. Things are different now, and not in a way that I think enhanced the value of Apple by a hundred billion dollars, or however much its market cap went up yesterday.

[aws]

Up another 3% this morning.  That's about $132 in gains since announcing Q2 earnings, which is about $565 billion in added market cap.

[villainx]

Up another 3% this morning.  That's about $132 in gains since announcing Q2 earnings, which is about $565 billion in added market cap.

 

I don't know how much to complain, but ...

[UK]

https://seekingalpha.com/news/3608898-apples-newest-street-high-price-target-700-bull-case

[Guest longinvestor]

 

This ad is making waves. A preview of coming attractions.

[beerbaron]

 

This ad is making waves. A preview of coming attractions.

 

Funny, it was pretty much Blackberry's message 15 years ago. It goes to show that timing and execution is key and that one should target emotions, not facts. Well done from Apple to move the puck where it wants us to go.

 

BeerBaron

[Guest longinvestor]

Can’t wait for the Opt In button. We’ll see how many want it.

 

Steve Jobs had one big unfinished business; Privacy.

[John Hjorth]

No matter what, the iPhone is [still] a disrupting device.

[Gamecock-YT]

 

This ad is making waves. A preview of coming attractions.

 

 

pretty rich for a company that's in the pocket of the Chinese government. I wonder why Apple Apps are allowed past the Great Firewall where Google, Facebook, and others aren't?

 

 

[Guest longinvestor]

It’ll do a world of good to have a vigorous debate in public about how your data is being sold and shared. Maybe a question or two about this during the presidential debates as well. It turns out that the vast majority of folks are oblivious to what data is being shared. The more everyone talks about this, the better.

 

To be fair, Google and FB should run counter ads. They know ads, don’t they Will they take out full page newspaper ads or on cable? Or personalized to me?

[Gamecock-YT]

It’ll do a world of good to have a vigorous debate in public about how your data is being sold and shared. Maybe a question or two about this during the presidential debates as well. It turns out that the vast majority of folks are oblivious to what data is being shared. The more everyone talks about this, the better.

 

To be fair, Google and FB should run counter ads. They know ads, don’t they Will they take out full page newspaper ads or on cable? Or personalized to me?

 

none are saints, but they didn't pretend to be either. But man, Apple's got some nerve spouting they are going to try and champion privacy...

 

 

I also learned on that trip that Apple Maps really sucks after not being able to use Google Maps to get around.

[Guest longinvestor]

I recently read Snowden's book out of curiosity. While not in agreement with what he did, after all he was a "kid" during the time he did his expose. It was all about the Guv's intrusion into the citizenry's life. Snowden only dealt with the corruption of the WWW from it's innocent beginning. 

 

Hoping someone has / will write a book only on the IT industry vested in the abuse of privacy. I'd like the "nuts and bolts" approach Snowden took. Being a novice in IT, I believe this is something to do with "Cookies".  I also had no idea that my device had a unique ID which is how targeting happens. I reset that every day since I learned.

 

Any recommendations, would like to read. Thanks in advance.

[Spekulatius]

It’ll do a world of good to have a vigorous debate in public about how your data is being sold and shared. Maybe a question or two about this during the presidential debates as well. It turns out that the vast majority of folks are oblivious to what data is being shared. The more everyone talks about this, the better.

 

To be fair, Google and FB should run counter ads. They know ads, don’t they Will they take out full page newspaper ads or on cable? Or personalized to me?

 

none are saints, but they didn't pretend to be either. But man, Apple's got some nerve spouting they are going to try and champion privacy...

 

 

I also learned on that trip that Apple Maps really sucks after not being able to use Google Maps to get around.

 

Why the hate against Apple. I don’t see them in the Chinese government pocket more so than many other companies doing business there. The privacy changes are beneficial to the consumer which is good step forward.

[Jurgis]

Apple ad is complete FUD and one of the reasons I don't buy Apple products. Apple ads were fake news before there were fake news.

 

Credit card numbers being overshared? Please. Apple privacy solution for not sharing CC numbers? Buy through Apple app store and pay 30% more. Good job! Typical Apple milking their fanboyz.

 

#FreeFortnite

[Gamecock-YT]

It’ll do a world of good to have a vigorous debate in public about how your data is being sold and shared. Maybe a question or two about this during the presidential debates as well. It turns out that the vast majority of folks are oblivious to what data is being shared. The more everyone talks about this, the better.

 

To be fair, Google and FB should run counter ads. They know ads, don’t they Will they take out full page newspaper ads or on cable? Or personalized to me?

 

none are saints, but they didn't pretend to be either. But man, Apple's got some nerve spouting they are going to try and champion privacy...

 

 

I also learned on that trip that Apple Maps really sucks after not being able to use Google Maps to get around.

 

Why the hate against Apple. I don’t see them in the Chinese government pocket more so than many other companies doing business there. The privacy changes are beneficial to the consumer which is good step forward.

 

Why the hate? Simple, it's hypocrisy.

[Liberty]

Apple ad is complete FUD and one of the reasons I don't buy Apple products. Apple ads were fake news before there were fake news.

 

Credit card numbers being overshared? Please. Apple privacy solution for not sharing CC numbers? Buy through Apple app store and pay 30% more. Good job! Typical Apple milking their fanboyz.

 

#FreeFortnite

 

Apple is much much better on privacy and security than its competitors. Much better. It's both a bigger focus, and a strategy benefit of not being primarily in the advertisement business.