Gruber linked to this today as part of his quarterly Apple earnings Claim-Chowder
Cook-Off. The guy was obviously way off - but why? The one real reason for selling he gave was that “Apple’s products are now reaching customers who are less likely to upgrade as newer models are released.”
I interpret it as, “because so many people have bought Apple devices, and a lot of those people aren’t the uber-nerds or super-rich who upgrade every year, Apple’s growth is going to take a hit.”
Let’s back up for a second though - are we really saying that Apple’s upside right now comes primarily from upgrades? That Apple’s growth has been driven by consumers upgrading their year-old phones at unsubsidized prices? That may be his experience in Greenwich, but you know where that isn’t true? Everywhere except the U.S.
On the earnings call Tim Cook went out of his way to point out how strong iPhone sales have been in Japan and China, and talked about the enormous potential for growth in India and Brazil. The possible upside for them is staggering there. Even if they only capture a small sliver of those markets going forward, it will make them billions upon billions more. Forget needing the constant churn of upgrade sales to stoke the earnings-growth fire - there is a whole world of untapped market potential for Apple.
Luxury goods in China are exploding, and there is no company positioned better than Apple to take advantage of that wave. I think the insight around iPhones being the Coca-Cola of smartphones is especially pertinent in these emerging markets. iPhones have the incredible position of being the BWM’s of cellphones without BMW prices. Impeccably designed with an iconic brand, but accessibly-priced. No matter how big of a screen Samsung throws on the Galaxy III, does anyone really think it’s going to be engender the lines around the block the iPhone 4S, a year-and-a-half old design, did in China?
To the analyst on the Eastern Seaboard, it may appear that iPhones, iPads and Macs have reached a saturation point of sorts. To the rest of the world, however, they are still aspirational items with enormous upside.
These guys can keep betting against Apple, but they are going to keep losing as long as Apple retains the brand they have among consumers worldwide. There is a market for well-designed goods beyond our shores - one that can deliver “hyper-growth” for years to come.