Apple to Experience Market Share Madness 42 comments
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Lately Apple (AAPL) CEO Steve Jobs seems to live the words of the poet Maya Angelou, who penned, “...in diversity there is beauty and there is strength.” Recent data is suggesting that Apple is on the verge of breaking out in a major way. The Apple market share story begins with the reemergence of the Mac, in a recent interview Apple COO Tim Cook indicated that during fiscal 2007, Apple sold 7 million Mac computers; still just a fraction of the 260 million units market estimated by IDC. “The ceiling for the Mac’s is nowhere in sight," Cook said, "and frankly even if the market itself isn't growing, for us, switching windows users is an enormous opportunity."
Considering that every one percent market share gain is worth 1.48 billion in revenue, it is easy to see why investors are excited about the trend. According to data released on Wednesday from Gartner, Apple still holds less than 4% market share (www.appleinsider.com). The recent release of the ultra-thin MacBook Air seems to be getting Apple into the hard-to-reach business user segment.
According to Pacific Crest Securities analyst Andy Hargreaves "Macbook Air sales appear to be additive to total sales, rather than replacing Macbook Pro sales," he said. "We believe a new set of corporate customers make up a meaningful portion of MacBook Air buyers." NPD saw significant gains in notebook systems sales for Apple during February, sales rose 64 percent in units and 67 percent in revenues year over year. The significant barriers to entry in the computer industry should protect these high growth trends for the foreseeable future. These barriers cause trends to slowly develop but once they catch on, they surge ahead. CEO Steve Jobs feels this surge is about to kick in, "The Mac market share is going up every single quarter. We're growing four times faster than the industry. People are starting to pay a little more attention. We've helped it along. We put Intel processors in and we can run PC apps alongside Mac apps. We helped it along. But I think a lot of it is people have finally started to realize that they don't have to put up with Windows - that there is an alternative. I think nobody really thought about it that way before." In a separate interview on October 16, 2007 Jobs said "The question is, are we headed for a tipping point, it sometimes feels like that." Mac sales alone could take this stock to $300 in 2009.
The world cellular phone market rose by over 10% to reach 1.1 Billion phones sold in 2007. The iPhone took a 0.6% share according to the research of Strategy Analytics (www.switched.com). Piper Jaffray analyst Gene Munster forecasts iphone unit sales growing to 45 million in 2009. The lifestyle appeal of the iphone has caused the smartphone market to expand from business users to all users. Any one of the +100 million ipod owners are potential iphone owners as the halo effect expands from ipod now to iphone. Bank of America analyst Scott Craig also feels that current estimates of iphone sales are too conservative (www.appleinsider.com). He points out that for every million phones Apple sells it adds $400 million to the bottom line. By selling 45 million phones Apple would generate in excess of 5 billion in profit. To put that number in perspective, Apple’s fiscal 2007 net income generated 3.5 billion.
Keep in mind, 45 million phones would represent only a 4% stake in the world wide market. Cell phones represent another market with rigid barriers to entry. Apple is a more than a year ahead of the competition with the coming release of applications from the SDK developers; the operating system on the phone separates this product from all the rest. iphone sales alone could take this stock to $300 in 2009.
If these two growth stories are in their early developmental stages then the next phase is still in its infancy. After announcing that they have entered the movie rental business, Apple has caught the attention of current leaders Blockbuster (BBI) and Netfilix (NFLX). The movie rental industry saw Netflix sell 1.25 billion in 2007 while Blockbuster generated revenue of 5.54 billion. I’ll bet those two companies are checking the iTunes movie rental progress everyday, I’m afraid we can see the writing on the wall as Apple methodically figures out the right tonic for the HD digital rental platform. Reviews thus far have been very positive (www.macsimumnews.com). It has also been rumored that itunes will expand its collection of games through itunes. PricewaterhouseCoopers released the report Global Entertainment and Media Outlook: 2007-2011 which estimates that the video game market will increase from $31.6 billion in 2006 to $48.9 billion in 2011. This makes video games the third-fastest-growing segment of the entertainment and media market. Apple is working on improving game compatibility with all of their products. The 150 million users of iTunes provide an effective advertising pool for these new movies and games. Movies and games alone could take this stock to $300 in 2009.
Are you starting to see a pattern here? Apple is the innovative leader in two gigantic markets with a third and forth on the way. This product diversity dominance positions Apple in uncharted territory. We have never seen a mature, large cap company with these kinds of growth prospects, and I haven’t even mentioned the ipod. Future growth might be limited since the ipod already dominates the MP3 market, but don’t forget they still have opportunities to grow through their partnerships with Nike and American Idol ("Apple Strikes Advertising Gold"), while continuing to expand internationally. The ipod has done its job and done it well. It planted the Apple seed to a new generation of users. 2009 will be the year that these seeds turn into significant market share gains. The market share story insulates Apple from typical consumer slowdown worries and gives investors conviction to buy and hold. To those investors who fear getting burned by high growth, I say Apple is not your average one hit wonder. Their diversity across product lines limits conventional high growth risk. Pre-3G iphone is a great time to enter a long position. During April and May I recommend averaging into this ‘best of all breeds’ company. There are too many catalysts too ignore. It might just take you to $300.
Disclosure: Author is building a position in AAPL.
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This article has 42 comments:
The second mark is services. Apple will build this as a brand which will have lower margins but contribute a boat load to the revenue side.
In my view, Apple is moving from a 3 legged chair to a 6 legged couch.
Been also writing positive about Apple myself. thecreatingwealthblog....
This is a must own stock.
$ 300 + Billion Market Cap ? OK. Keep believing and keep buying - the stock has to be distributed to someone !!!
I love my Ipod, touch. I rented and watched movies on the plane.
Long apple, since 2000.
I am a long Apple holder and a fan so you can call me a Machead and I am not going to be offended , this is one of the greatest companies of this century and Steve Jobs.. like him or not, set out to change the world and little by little he is doing just that. Passion and vision will do that
I never understood why anyone needs to bash a great company (unless it's MS ;-) but the point is you can bash al you want because we are used to this kind of trash talk .
You bashers have told us years ago Apple was on it's way out , obviously you were wrong and you will be proven wrong again , numbers don't lie , Apple can grow to a $300 bil+ company in fact I see Apple being the GE of tech/entertainment/? .
As long that Steve Jobs or another visionary is in charge
they will continue to expand into new markets
Markets are a game governed by one simple result: The transfer of the wealth from the hands of the many to the hands of the few.
In that game, a stock gets marked up to a point where it can’t go up any more. Fundamentals, great story, etc., etc., doesn’t mean a damn thing. A top is reached.
Once the markup is obviously over, the smart money ( about 1%) begin to sell. Who do they sell to ? People like you, the people who “believe”. After a significant fall, they stop selling for awhile.
Who buys ? People like you, and the guy long since 2000 – of course, it’s such a great story, the stock was a buy at $ 202, it was a steal at $ 117 !!!
After a while though, it becomes obvious that it will not take out the previous high. Then after you and the other “believers” have loaded up, it starts heading down again. Now the previous low gets taken out.
But Steve Jobs and the story is so great, now it’s really a steal at $ 100 !!! People like you start buying again. The 1% stop selling for a while. The rally is on. But now it doesn’t take out the previous level it reached and makes yet another lower high.
This will go for some time. Then the point will be reached that suddenly you wake up ( like the guy long since 2000 ) and realize buying on the way down has eliminated all your profit. Now you are in the red.
Now people like you, the true “believers” start panic selling. The stock really falls now.
Finally, when you are no longer a believer, then the stock will have been marked down as far as it will go – because there is nobody left to sell. The 1% will start accumulating the stock again.
Personally, I think Steve Jobs is a visionary and great business leader. But that doesn’t mean a damn thing.
The point is, the Market is a game – nothing more – nothing less – and most certainly for those who “believe” like children playing on the freeway.
Apple gained market share every Q from 06 to 08 easily outpacing the PC industry, growing 32.5% from 1Q 07 to 1Q 08
so yes maybe you are reading the wrong article
In the early 90s there was an "analyst" by the name of Sleighter who, after Apple's market share was released at 2.7%, he predicted - no he declared - that Apple would be bankrupt and out of business in exactly 14 months. He even said that the market share data points were a straight line on graph paper, and his ruler pinpointed the company's termination. Yup. His golden ruler. He also declared "Game Over" (for HP, Dec, etc.) after Intel announced their forthcoming 64 bit (880 mb/s) chip named Marcedes which would take over the server market. This chip turned out to be Intel's most collossal failure, costing billions and never really coming to fruition as visioned.
My cousin loves my iPhone, but will never buy one because Apple is "not a good company", and not competitive with PC companies. He's a PhD geneticist, so education does not seem to be a basis for this irrational bias.
Many of the critics and antagonist claim that there is nothing behind Apple. Its all just a bunch of Apple heads, nothing more. And if Apple has accumulated $18B it should give all this back to stockholders. And do it now. Just money made by over pricing worthless merchandise that only a child would play with.
It is hard to say if these people, in their weakest moments in the dark of the night, think they might have been wrong. But the smarter of the bunch seem to be acting on these fears, and are quietly going into an Apple store. And buying a Mac.
Long on APPL since 1996.
"NPD saw significant gains in notebook systems sales for Apple during February, sales rose 64 percent in units and 67 percent in revenues year over year." The train is gaining momentum across several product categories is the point of the article, and each of those categories holds huge opportunities. Current iPod users are now buying other products... like high margin computers and iPhones... and not sure where you got "stuck with the same market share", Apple market share has been building quite handsomely (4x competition) especially in the US market, with the rest of the world ready to start coming up to speed as well. And long time Mac users are buying more and more Apple products, and convincing others to do so in droves... The cash register is ringing.
you speak like a trader and not like an investor, what you say is all relative to market,company conditions and your own strategy.
I believe if the fundamentals are good and the company can maintain or beat growth expectations the stock can only go up, Apple is only scratching the surface, with an average volume around 40 mil potentially Apple can reach another 50 mil trades.. trust me there is plenty of money to come around, especially since there will always be sellers.
Historic data says I am right, just look at a dow chart since the 60's and tell me where the market went, here...
stockcharts.com/charts...
as you can see since the 60's the dow went from around 500 to around 13000 today, I don't need to tell you that if you invested $10K in the 60's right now you'd be a multimillionaire.
The market is not a game , trading the market is a game , investing is how corporations pay for innovations .
You are confused between trading and investing, investing is no game
When I started I had $ 2000. to my name. To date I have grossed over $ 18 million – haven’t had to get up to go to work – or anywhere else for 17 years running now. And I’m in my early 40’s.
I am in the 1% percent.
I was like you when I first started, I was believer too. I truly believed all those things really mattered and meant something. Belief dies hard – and it obviously will with you.
Do you remember when your Mom or Dad told you a bedtime story ?
It is no more than that. The “story” ( what you call “fundamentals” or “facts” ) is nothing more than a means by which the stock is marked up and marked down.
And I emphasize I am not a “Trader”. There’s an old saying “Day Traders die broke” – and there is a reason for that. Nobody can catch all the fluctuations. Trying to is like jumping back and forth across active train tracks.
“Investing” and the belief therein is the means by which wealth is voluntarily transferred from the hands of the many to the hands of the few.
Belief dies hard – and it obviously will with you. Keep watching what happens in APPL.
In time you and the others here today will appreciate the wisdom so freely passed here.
I’ll give you a free lottery ticket – WAAMT. Take some of your APPL profit and open an initial position, and if APPL continues up, double down at 50% - and enjoy gains of 100% plus.
You see everything you and others say about APPL is right – except that it doesn’t matter.
Time will demonstrate that most clearly. I wish you good luck – because as long as you believe, you’ll need it.
"To those investors who fear getting burned by high growth, I say Apple is not your average one hit wonder. Their diversity across product lines limits conventional high growth risk. "
good luck to you, hope you get to keep some of the 18 mil ;P
Thank you for contributing to the AAPL FUD, you make the stock affordable and generate opportunity for some of us to make money. BTW, I buy any stock that's cheap and that includes the AAPL shares I bought at $120, getting ready to unload these anytime now. Please continue the FUD so I can buy it back LOL.
Wow. You haven't taken your meds today, Huh? It strikes me as odd that someone who has amassed the money you claim you have has the time and/or inclination to pontificate from the pulpit as you've done here. I think you are either:
A) An academic type who's long on theory and advice but short on real world experience and funds or
B) Someone with an axe to grind/agenda, i.e. just plain short
Either way, this is just one of millions of blogs on the net, so your 'wisdom' is unlikely affect that "99 per cent" for which your message is directed. And as far as the other "1 per cent" you claim to be a member of? Well, they're too busy making money to bother dispensing advice on a silly blog.
Study RCA in the late 1920’s and Polaroid in the early 1960’s. Those are but a few of many others – they just happen to be the “in” technology company at their respective times.
Erase their name and insert APPL.
Polaroid was in the 220’s in January 1962 – on the same “fundamentals” ( everything said here was said there as well ) and in June 1962 had dropped to the 80’s. Ditto RCA’s moves.
It’s the same story, exactly. From single digit to triple digits – and back down again.
All the while, “believers” bought all the way down, and like those of you in APPL, eventually succumbed to “panic selling”. The “believers” always do.
As the great Jesse said, “Nowhere does history repeat itself more than in the Stock Market.”
So simple a statement and so very true.
And yes, I am Short – why should I be Long with the Risk – when I can sell the Gain incrementally with no Risk at all ? Why should I care what direction it goes in ?
$ 300 ? Unlikely, but perhaps. $ 3000 – impossible. The big gain is already in APPL.
Now it is a matter of Monetizing it through Distribution.
I don’t need to speculate on what is going to happen – nor do I care – I’m only interested in sure money – and that what APPL is.
One of the most important things a Man can know is what he doesn’t know.
And none of us know exactly what is going happen – the key is to understand the outer parameters of what can happen.
This and the other comments are for those interested in opening their minds – so they too can benefit from the gift of enlightenment. It is to be shared.
These are Seeds for the Mind. Planted today for fruition in the future, when events bear them out.
I read over your words, trying to glean any meaning, let alone wisdom. And can't find any.
Many years ago - and this is the closest thing you might be trying to say - there was a group of people, starting in accedemia , who proposed a concept of stock valuation. It was based on what they described as "random walk theory". This "theory" never looked at anything that might be otherwise called a fundamental of investment value, but instead looked at stock behavior. I have now forgotten now many of the tenets of this theory, but have the distinct feeling that this type of investing is now considered bunk.
I assume that your objective is to gain money, versus the perverse objective to lose money. And you have chosen Apple as your vehicle to gain money. By shorting it. So you must have a theory unrelated to fundamentals of Apple to believe in this, maybe like the randomwalk theory of trading. But not investing, since you have no ownership in Apple other than a commitment to buy. So, when the stock hits 200 might be a good time to cash out a short position?
I was broke and working for minimum wage in my early 20’s. But by the time I was 34, I had over a million in Cash in my bank account.
If I could attribute my success to any one thing, it has been having an Open Mind.
It is Human Nature to attack that which you can’t understand, or don’t want to understand, rather than to have a dialogue of substance on the merits.
There was a great classic “ A Wonderful Life” because it has such an important message of how you can affect the lives of others, even if you don’t realize it. Just imagine when you try.
For you critics here today, I’ve already affected your life and you don’t even know it.
Time will turn the light on; when and where is no matter.
Unlike others with money, instead of living lavishly, I‘ve used my money to buy the valuable commodity of all: Time.
So I do confess – I am a little bored – and I haven’t taken my Meds – since I have all day of every day to take them as I please - or waste my time on a “silly blog”.
My advice to you Mr. Dick M., ( and Long since 1996 ) – take your Gain while you can – and be thankful, not greedy.
And if in doubt, go back and study RCA and Polaroid – and not just the price movement, but what was said and written about those companies at their tops in their respective eras.
Finally, for you “Barbarian” – you seem like an Open Minded one as well – my advice to you – take your profit and sit it out now – at least 50% of your profit.
I think it’s time for Meds now.
Are you saying you do look at fundamentals? And, if so, what fundamentals are you aware of with Apple which is reflected in you short position? Be specific, instead of just yammering on. You seem to think that people who have long positions are simply greedy. What a juvenile attitude! What is the meaning of the word investment in your mind?
If you made so much money - a statement most people would not be so brazen to say - were you just plain lucky? Because you studied the fundamentals? Someone told you to? Or what?
Frankly, taking your advice would be the last thing I would do, and that's being generous. And I see no evidence in your words of anything approaching an open mind.
So, what is your great wisdom regarding Apple? And when to exercise your short? You say that people who are long are just greedy. Correct? Now, what do you call people who are short?
(I'll bet you are one of those who keeps muttering, "Just you wait, Charlie Brown")
Carlos.. what makes you so arrogant to think I haven't already done that
many times over (not with Apple alone) ?? LOL
I am also in my early 40, I am typing this from my Macbook in my Home Gym, where I have been working out on and off since 10 am ..
trust me Carlos you're not the only one with wisdom and mine is as good as yours or anyone else if that matters.g
Back to Apple.... this is not the time to take profits , this is the time to load up ..(maybe not today), the whole of 09 will also be a great year for Apple, Google , intel and Microsoft.
I have got a lot of wisdom from your posts especially the references to Jesse. But now i want meat and potatoes. Why WAAMT? and why now ?
Anyone who has been long APPL since then has made, what 1800% profit?
Sure, if we knew when the dips would occur and sold and bought at jus t the right times, the same guy could have made several times the 1800%
I think you are Steve Ballmer. :-)
Sure, we are PLENTY used to MORONS bashing Apple. So far, you all been wrong. I think a lot of geeks HATE apple because they know that MIcrosoft has only ever copied Apple's ideas, badly. They hoped, no BELIEVED that Apple would 'go out of business'. Funny, but that didn't happen.
Microsoft KILLED off all sorts of competition, and did it illegally (though they were never even the slightest bit punished). But Apple survived, not because people believed in them, but because they always were a better option.
Carlos, my question is how does someone know when the peak is. Maybe it is maybe it isn't.
Below is from July 2007 report. One compelling story about Apple is their single digit market share. 6.6% now in the US and 4% or so worldwide. Alot of room for growth. IDC is the authority in this area. Not sure your point on installed base versus sales share, all any investor cares about is how much they are selling and if they are growing numbers/share or losing it.
U.S. shipments of Apple's Mac computer line grew 26 percent during the second quarter of 2007, according to just released data from market research firm IDC.
The firm said Apple shipped 960,000 units within the U.S. during the three-month period, good enough for a 5.6 percent share of the overall U.S. PC market and fourth place on its list of top vendors.
Apple's U.S. share is up from 4.8 percent during the year-ago quarter when it shipped 761,000 units, according to IDC's historical data.
Great article!! keep em coming.
Rick
The Dell was horribly slow, with Norton Antivirus, a necessity, taking over and making the two running applications crawl or freeze. So a year ago I bought a MacBook which I use as a PC running Windows XP flawlessly and very fast over Parallels.
I am also having fun updating a G3 series PowerBook, 10 years old but like new. It has an only 4 Gig hard drive, but handles OS X 10.2.8 just fine, and I'll put in a wireless card and keep it in the kitchen for Googling and email so I don’t have to run down to my office as often. There is something very cool about having this classic Apple laptop in the kitchen (you see a lot of them in ‘90’s movies). Having an old Dell there would just be embarrassing!
I am at the leading edge of the boomer generation, and the comment above about 60+ age group class was right on. The boomer generation are far more health conscious, “with it”, and interested in the latest gadgets than their predecessors. They are starting to have more time and extra cash with the kids finished college. Most of my 50+ and 60+ friends have iPods, and several have recently switched to MacBooks or iMacs. I believe this generation offers a huge untapped market for Apple, as they have available funds, a curiosity and interest in technology, and want to be perceived as young and hip!
Yes, of course I own AAPL! It will be fascinating to watch it’s market share grow.
Great opening line (the quote). I am impressed to see it here. You have me as a fan.
Also - absolutely great article. Here, clearly stated, and more or less complete, is the summary of the "Apple believer" argument. From here one can choose to disagree on various points if one so desires, but if you wish to argue that Apple is not a good investment (long term) then you must address these issues.
It is, to me, a very compelling argument. Which is why I am long long. (Position=long; term=long)
Good luck to us all! :)
The thesis of this article is correct and known by a fairly informed average investor. But if you crack down and do a involved spreadsheet about all of what is known and your best guesses about future revenue growth, the numbers won't lie.
Asshat after asshat always refers to the mythical 'smart money' - a make-believe ultra-genius investor who bought FSLR back 18 months ago, who bought CROX 18 months ago, who bought TASR when it was a few bucks ... and then mythically sold all these stocks at their zenith and are sitting there rich and laughing at everyone else.