Apple’s stock gets hammered because the company does not work the same way as competitors. Apple is an aspirational brand. That means the company’s products occupy the premium end of the product spectrum, where margins are higher. Customers aspire to own Apple products, not competitors. Despite the constant gloom and doom here are two numbers that ensure Apple’s future.
China. India. Elsewhere.
While Apple’s products sell very well in the U.S., they also sell well in Europe and parts of Asia, and despite the fact that China will have far more smartphones in use in a few years than the U.S. and Europe combined.
Smartphone usage in India remains in its infancy, relative to the U.S. and China, but India’s middle class is growing even faster and, again, the only aspirational brand on the horizon is Apple and the iconic iPhone.
Simply put, Apple has a growing universe; a customer potential that will drive growth for years as China’s market matures, and India’s market grows from feature phones to smartphones.
The Upgrade Cycle
Often underestimated and overlooked by analysts is Apple’s huge customer base, rivaled only by Samsung in number, and not in loyalty. Smartphones need to be upgraded every few years, thanks in part by advancing technology which brings more features, and heavy usage. iPhones need to be replaced and that happens in cycles.
The iPhone 6 and 6 Plus models were outliers and satisfied a huge pent up demand for iPhones with larger screens. That brought record sales and profits to Apple a few years ago, but also served to setup disappointment because iPhone 6s, 6s Plus, and iPhone SE seemed to stall Apple’s growth.
That means 2016– iPhone 7, or whatever name Apple attaches to the next iPhone running iOS 10– has similar pent up demand so some analysts predict sales will exceed that of iPhone 6 and 6 Plus just two years ago, especially as India’s middle class continues to grow and Apple’s presence in the country improves.
Hiccups On Parade
You know what they say about prognosticating the future?
The best laid plans of mice and men often go awry.
There are storm clouds on the horizon that could impact Apple. These include a softening world economy, continued fallout over the U.K. leaving the E.U., and competition; especially those that create hardware that rivals Apple’s iPhone and iPad, but cost one third as much. Apple’s advantage remains the aspirational brand and iOS, which further differentiates the company’s mobile devices from all Android devices.
The growth of smartphone usage in China, India, and elsewhere will give Apple its share of mobile device business in years go come, but those upgrade cycles of every other year or so may drive sales and profits even higher.
That’s my story and I’m sticking to it.