Entering text into the input field will update the search result below

Does Apple Have An Upgrade Problem?

Mar. 05, 2018 10:56 AM ETApple Inc. (AAPL) Stock179 Comments
Bill Maurer profile picture
Bill Maurer


  • Battery replacement wait times are increasing.
  • JP Morgan lowers iPhone X estimates.
  • Are higher prices the best solution?

No matter how positive you are on any company or stock, it's always wise to look at potential risks to the downside. Today, I want to explore this angle for Apple (NASDAQ:AAPL), a name I've been very positive on over the years. While I still think that upside remains moving forward, there is one risk for 2018 that does worry me. I'm talking about device upgrades.

If we go back to the fiscal Q1 earnings report, Apple reported unit sales in all three main product lines that fell short of expectations. Again, we can throw out year over year growth rates seen as headlines because of the extra week in the prior year period. Despite the unit sales misses, the company was able to still beat overall revenue expectations thanks to much higher than expected average selling prices, primarily on the iPhone. The iPad also saw a nice ASP gain over the prior year period.

Everyone knows that Apple charges premium prices for its products. With those prices, however, comes an expectation of high quality. When you are paying $800 or more for a phone, you expect it to last, usually more so than one that only costs a fraction of that price. One Apple analyst recently published the following estimate of an Apple device lifespan, with the figure rising over the past couple of years.

(Source: Horace Deidu via MacRumors article)

I bring up increasing lifespan estimates because Apple's thought process has somewhat changed in recent times. We don't necessarily see every product refreshed after just one year anymore. Small screen devices such as the iPhone SE and iPad mini are now considered quite outdated, and I'm curious to see if we finally get refreshes this year outside of the minor upgrades to storage space we saw in 2017. At the end of

This article was written by

Bill Maurer profile picture
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year. Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (179)

SEC Investigator2 profile picture
We are now 99.9% certain that UBS is the option manipulator. UBS has a 1 million share block at $179.99 that cannot be seen on Level 2.......if you don't know already, Art Cashin is the biggest stock manipulator in the world, and is drunk by 11am everyday. All new traders, on Wall St Stock Exchange, are mandated to take his crash course named " The Art of Manipulation" How appropriate!!!!!
Do forgive me if we don't believe you. Please explain to us why he would manipulate Apple and no other stock in the same way. By your own numbers, his presence is only $180million... hardly enough to have any major impact on Apple's stock prices.
davel profile picture

Yes. The battery replacement will steal some marginal customers

What it will do is create more friction for upgrades.

However, with the X Apple has charted a new course. New phones this year and os improvements will seek to push customers away from these old style phones.

They won’t have faceid to unlock your phone or as part of any number of new uses Apple will unveil. They won’t have any of the under the cover features Apple introduced last year making their current phone less than satisfactory.
The Mathematical Investor profile picture
Way too much focus on the battery upgrade. It will not materially affect sales of new phones.
SEC Investigator2 profile picture
Following stock up today:


But Apple down over 1%....TIM COOK MUST BE FIRED!!!!!!!!
SEC Investigator2 profile picture
Apple only high end tech stock down.....Tim Cook must be fired for facilitating the manipulation of Apple's stock price. Option manipulators will not allow Apple to close at or above $180 before Sept 2018. When will you folks wake-up to this fact?
sog35 profile picture
SEC investiloser 2


Apple has outperformed the market the last 1, 2, and 5 years.
Kids love ChromeBook computers better than any Apple products
The Mathematical Investor profile picture
A Chromebook is not in the same market as a Mac. It's like comparing a Mercedes to a Ford Fusion.
Apple is now losing “mind share” among the customers of the future — kids — and losing the innovation race by falling behind in the next wave of computing, which is going to be in voice-based cloud platforms. Watch in 2018 for the decline in the Apple stock price.
sog35 profile picture
Voice based platforms? LOLLLOLOLOLOLLLLOLOL!

So instead of looking at a screen in the future we are going to have our digital assistant describe what something looks like? That is called a Radio. LOL.

The only reason Amazon/Google is focusing on voice based platforms is because they got destroyed by Apple in the phone/tablet based platforms.
Apple had disappointing sales with iPhoneX ... they can’t innovate ... no innovation after Jobs died ... only reason the stock went up this is is because Warren Buffett going on a buying frenzy and the Apple fanboys riding his coat tail
The Mathematical Investor profile picture
<<< Apple had disappointing sales with iPhoneX>>>

Disappointing comment. The X was the best selling smartphone in the 4th quarter, even though on sale for only 2 months.
It is a challenge but the higher pricing and increase in service revenue pretty much evens that out. Then, of course, there are the wearables. 3 years ago, no one was thinking about this. Now, it is a huge growth segment.

Apple, like most of the market, is about to suffer from a broader market downturn. However, the big picture for Apple going forward doesn't change.
sog35 profile picture

I welcome a broad market downturn and if AAPL share price goes down to $130 I'd actually be pleased.

That will allow AAPL to buy massive amounts of shares at cheap prices. I would also buy prices.

I don't mind holding AAPL for a decade or more. In about 10 years I would not be surprised if AAPL is at $500 during another bull cycle. At that point they would have halved the amount of outstanding shares.
Only fanboys continue to support Apple an American company that will not manufacture its products on USA soil ... and like the rest of these tech companies they overcharge people for there products ... Once the fanboys lose interest in Apple’s products you will see its stock tumble again .. Bill Gates probably not interested in saving Apple again ..
The_C_Man (Call me C) profile picture
Read between the lines of what happened when Microsoft invested in Apple. It wasn't so much Bill Gates investing in Apple but investing in a friendship. I wonder how much that original investment of $150 million is worth today.
The Mathematical Investor profile picture
<<< I wonder how much that original investment of $150 million is worth today.>>>

If the $150M was kept in Apple -- it's probably worth around $30B, not including reinvested dividends. Bill Gates isn't a dummy.
sog35 profile picture

once the fanboys lose interest in Apple..........people have been saying that for decades! LOL.

Apple stock tumble again?

Apple has outperformed the market the last 1, 2, 5, 10, 15, 20, 25, and 30 years. LOL. Good luck.

You've been waiting decades for Apple to underperform the market.

Must really suck being an Apple hater. Cause 90% of the time you are getting you ass kicked.
Apple hasn’t innovated in years...What makes you think they will innovate now ...
sog35 profile picture

you say Apple has not innovated in years. And they are still growing massively and generating $60-$70 billion in free cash flow a year.


That just shows how POWERFUL they are. They are not innovating and they are still DOMINATING. LOL. Sorry for the bad news.
The_C_Man (Call me C) profile picture
Apple's greatest innovation was and is the subliminal messaging/advertising built into it's phones/devices pushing the subconscious need to have the latest iDevice. Slightly above or below the normal hearing level the brain still recognises the message. It's also built into the screen and is the slight flicker every few seconds. Impossible to see with normal vision it's still there. Load music and videos from iTunes and the message is there. You are correct in saying "they are still DOMINATING. LOL" by turning Apple customers into Apple slaves.
sog35 profile picture
The C Man -

Whatever Apple is doing, it has been working year after to year. And my portfolio thanks Apple.
corvette72778 - Stocks, Residential Real Estate, Personal Finance, AC Guru profile picture
QQQ is up 8% YTD vs AAPL being up only 4%. Apple is under performing the market and it would be wise to own QQQ instead.
sog35 profile picture

YTD? Who cares. That is less than 65 days.

AAPL and QQQ have returned about the same over 1 year (don't forget dividends and AAPL is part of QQQ)

AAPL is outperforming QQQ over 2, 5, and 10 years.
corvette72778 - Stocks, Residential Real Estate, Personal Finance, AC Guru profile picture
The tide has turned. The last 10 years is absolutely not going to be the next 10 years. Its foolish to consider 10, 5 or even the last 2 years return on Apple to estimate the future. Apple is hitting the law of large numbers. And that is why QQQ has outperformed AAPL over the past year! There is also considerable more risk holding AAPL vs QQQ which holds 100 stocks! So your risk adjusted return is much lower. Its not worth holding AAPL going forward especially considering you can just get QQQ with less risk instead.
The Mathematical Investor profile picture
<<< The tide has turned. The last 10 years is absolutely not going to be the next 10 years. Its foolish to consider 10, 5 or even the last 2 years return on Apple to estimate the future.>>>

But two months is ok to consider ? ha ha
06 Mar. 2018
There is another interpretation of Apple's "upgrade problem".

In introducing its cheap battery upgrade offer, along with lengthening waits for batteries with which to upgrade, the service level for ALL Apple retail customers for ALL Apple retail products in ALL Apple retail stores has dropped since late December / early January and wait times to get any appointment at all have increased.

Thus, by pleasing anyone with an iPhone 6 or later whose battery needs to be replaced, all other customers have been made to wait.

I write as someone who has taken the same 2015 MacBook Air in for hardware repair twice this year and has booked a third appointment - it takes at least 4 days to book this in, during which the laptop is basically impaired or in one case useless, as the battery had failed. Another MacBook Air user, for whom I am considered first line support - though the machine is only 18 months into its 3 year AppleCare support - has had to return his 2016 MacBook Air twice for hardware repair, in one case due again to battery failure.

While phone quality and lifetime might be increasing, it seems to me - as a long term Mac user directly responsible for three Macs and indirectly responsible for a fourth - that Mac / computer quality and lifetime is decreasing.
dougsull profile picture
I have an iPhone 7+. I did not upgrade to the 10 because the screen is too narrow and the 8+ is not a significant upgrade to the 7+. However, I will upgrade to the 11+ in 2018. I believe many others are also waiting for the 11+.
Quantum Coins profile picture
I think the upgrade cycle is getting longer. Given prices I see more people putting up with annoyances in their smartphones in general.
Wiseyou profile picture
Maybe it is about time that the iPhone takes less of a dominant role in Apple. Isn’t this what all Apple bears complain of all the time, that Apple is a one-product company? Apple has 7 other major products besides the iPhone: iPad, Mac, Watch, TV, AirPods, HomePod, and Services. Several of these products are growing at double digits, i.e. Watch, AirPods, and Services. If the iPhone and Mac plateau to 50-60% of Apple’s revenues, double-digit growth of iPad, TV, AirPods, HomePod, and Services may help smooth the valleys and peaks between supercycle years.

Most technologies have optimal market windows and are overtaken by other technologies. The Mac desktops were replaced by Mac laptops but big screen supercomputers (iMac) are replacing desktops. The iPod has already been largely replaced by the iPhone. Mac laptops may be replaced by the iPad. Homepods may replace Apple TV by becoming the sound and video sources for homes, as well as home control systems. Apple has continually reinvented itself over the last 4 decades, from the Apple II to Mac, to MacBook, to Newton, to iPod, iPhone, iPad, Watch, AirPods, and HomePod.

Not all Apple products have been successful. People probably don’t remember the Apple Mac TV, a combination of a Mac that can be switched to a TV launched in 1989. The first Apple portable was not particularly portable (35 lb) and could not be easily held on one’s lap. The Newton was a flop, even if it had not been prematurely cancelled by Steve Jobs. The Apple Speaker (introduced by Steve Jobs) was dead of arrival. The Mac Pro was used only by a tiny niche market but never became popular.

But, a strong case can be made that Apple’s products have improved substantially over the past decade. The MacBook Air and Pro were the most successful laptops. The iPhone is the most successful smart phone. The iPad is the most successful tablet. The AirPods are the most successful wireless earphones. The Apple Watch is the most successful smart watch and makes more money than all Swiss watches combined. Even the Apple TV has sold over 30 million units.

If Apple introduces one or two new products a year, regularly upgrades the older products, it can grow at double-digit rates for the next decade. It may take several years for each product to sell to many millions of people. At the present, services is only 10% of revenues. But, eventually, services will make more money than hardware, as the number of users expand. Just music streaming alone has substantial growth since currently less than 10% of Apple device users are subscribers. Combined with iCloud, apps, Apple Pay, most users may pay more for services that the cost of the devices.

Finally, it really doesn’t look like anybody will be catching up to Apple any time soon. Yes, many companies are offering cheaper devices. Combined, these companies may have a majority market share but the premium users and premium devices are mostly Apple users. This shows up very clearly when one looks at the Apple users on internet. Although they account for less than a third of the internet users, they spend more money than all the other internet users combined.
RE Wiseyou

AceVentura profile picture
I did not have a problem upgrading to an IPhone 8. I doubt my wife will have a problem upgrading in about 6 months. About the same time my mother in law will upgrade. I told my son, his next upgrade is on his dime-so he might have a problem-but I think he values a IPhone more than any other thing in life at the moment. We have a total of 10 Apple products. Nice that owning shares of the company pays for it all.
SEC Investigator2 profile picture
UBS was blocking Apple from moving up....they were using 40,000 share blocks. You folks better wake-up!!!
A timely article.

The iPhone is following the trajectory of the iPad. That had many consecutive quarters of plummeting sales, before finally stabilising well below its heyday. Yet, every quarter, Tim Cook would say how much faith he had in the iPad. Expect to see similar empty words from him as iPhone sales fall off a cliff.
5G will make you upgrade to a LTE/5G phone
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About AAPL

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on AAPL

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.