When you're pointing it is at anything other than Macs. Do a search and you'll find the articles from just a few days ago on the remarkably stable $1,300 ASP for Macs. That's my point. Macs make up a sliver of the overall market because they are priced 2-3x above the ASP of their category. If smartphone pricing heads the same way and iPhones, iWatches, iPads, etc maintain high prices relative to other smartphones/watches/tabs, I suspect they'll secure a similarly small share of the market. I think Apple would be wise to go this route... it has proven stable for them in other areas.
If it is a niche, it is a growing one. Apple desktops and laptops have been taking share consistently for years. Indeed, Mac global share has rocketed from ~5% to ~7% (higher in the US) in just a few years. If they can gain another 50% in coming years (easier said than done), that would put them ~10%. Impressive, but that too was my point... premium pricing inhibits domination. I think the iPhone/iWatch combo will be hard pressed to be dominant if priced high as well. Either way, Macs make up a small part of Apple's overall profits. Important, but not the most critical product when it comes to driving the stock.
The iPad had a 460ish ASP in recent quarters. For your statement to be true, Apple would have had a $710ish ASP a "few years" ago. I don't think you are right. From 662 in Q4 2010 to 440 in Q4 2013. So $222 decline for that three year period. This article discusses some of the factors from late 2013 but is just a snapshot.
First, cash balance is neither "much" smaller or likely any smaller at all nearly 2/3 through the current quarter. They lowered the most accessible (domestic) portion of their cash balance via the share repurchases and dividend. Yes, they are still adding lots of cash each quarter. Without those two items, the cash balance would grow more quickly, and it seems Cook has taken the decision to continue keeping the balance more managed (wisely, I think).
Consensus expectations have always underestimated new Apple product categories prior to and up to a year following product launch. Do you believe that's predictive of the future? If anything, isn't it an argument that investors should have learned by now that Apple will always beat consensus and begin to adjust their expectations accordingly?
Whether I'm running or mountain biking, I don't like having to rely on a smartphone to see simple display functions. Maybe my pockets are deeper than yours or maybe I run and bike even more but, I'd love a display that plugs into the Apple ecosystem that is visible and accessible when I'm outdoors. ? I was saying the same. I said I'd find the same value in a watch accessory, but explained the importance of pricing there.
Apple's multiples won't remain where they are. If you want a precedent, track Google's share price malaise between late 2007 and mid year 2012. Forward P/E is predicting what will happen. If Apple's profits increase anywhere nearly as steadily and aggressively as Google's, then Apple is the biggest bargain on the planet right now. Do you think Apple will have greater profits in the coming year than the previous one?
Apple's way is more sustainable. You were talking in relation to FB, and I agree. But keep in mind that Apple's profits are nearly 2/3 from one product. If something goes wrong with that product's profit generation, AAPL becomes anything but sustainable, at least not at the current levels. They are hugely reliant upon one product right now, hence the aggressive push and expectations for "the next big thing". |
