Several years back I noticed that people stopped upgrading their iPhones. As far as I’m concerned, Apple’s innovations have stalled. It’s not that Apple’s lost their fan-base, it’s that everyone I knew (being in the silicon valley) is waiting for Apple to put out something that’s worth upgrading their existing and perfectly working phones for. When the iPhone 6 came out, 90% of the Apple fanboys I knew upgraded, and consequently, I put in one of my few earnings option bets on Apple that they were going to blow it out of the water. Spoiler alert, they did.I feel like an opportunity has presented itself again, so let's talk about why this might be a good time to invest in Apple. What are some risks that deter me from making an options play but still a worthwhile regular investment, and why I think it might get really exciting for the next couple of years.
The Not So v1 Processor
Apple puts out new software and hardware updates pretty regularly, but what’s strikes me as more exciting than most is because of the M1 processor that they’ve just integrated into their MacBook lines. When this was first announced, many brushed this off as a cost-saving slight improvement, the first iteration of what Apple likes to do kind of schtick. However now that the MacBooks are out and people started using and reviewing them, the best way to describe it is that the feedbacks have been overwhelmingly positive. Several reviewers pointed out that they were skeptical but are now convinced that it’s the best laptop they’ve ever used. Now, why is this important to me.
Upgrade Incentives
#1, There is a pretty clear indication that people with MacBooks are now incentivized to upgrade. This is true for both MacBook Pros and MacBook airs. I’m actually buying a MacBook air myself, because the new one is basically blowing my 4-year-old pro out of the water because all signs point to the fact that the new M1 process is not an incremental improvement. It is an improvement in magnitudes.
Intel's Business is Cannibalized
#2 The 2nd indication is that the Intel CEO is fired. Of course, the pressure on Intel is no joke and they’re getting blitz-krieged on multiple fronts, but I hypothesis that the fact that Apple’s chip allows their laptops to not only outperform Intel chips but be FANLESS has something to do with this. Intel’s leader has no answer to this, therefore he needs to go. This in turn tells me Apple’s on the right path towards success. With all the hype I usually like to find novel ways to validate my hypothesis as well and one of them that was particularly interesting to me is the fact that reviewers are saying unless you’re doing video editing all day the new MacBook air is more than sufficient and if you look at apple’s site, the MacBook pro has a predictable delivery of 2-3 business days, but the air is clearly delayed, presumably because of an influx of demand.
The Obvious but Scary Risks
All of this accumulates to what I think is a strong performing quarter. The biggest risk IMO is the fact that macs currently make up only 10% of Apple’s revenue. It plays a huge role in their service sector, I’m sure, which makes up an additional ~18%, but the elephant in the room is the iPhone (44%) and it’s started to trend down. I personally do believe new iPhone are in fact just that boring and the app ecosystem hasn’t had any interesting stories to boost new iPhone sales either, this makes me quite concerned about how the general investors will react when another drop is potentially announced. The flip side of that is if Apple can announce that Mac sales are so strong it’s the next grower then we’re about to see some amazing stock prices. I believe the probability is there, because macs don’t just serve consumers, but also serve business users in many verticals, and an amazing laptop that is better and lighter than its predecessor can trigger bulk buying that will boost apple’s sales in amazing ways.The 2nd risk of course is the bubble we’re all investing in and when will it burst. From my research and gathering feedback from reputable sources, I’m now in the camp of belief that this bubble will get extended because so much extra stimulus money is injected into our economy. Therefore, I will start investing again.
Hope this helped; leave a comment; I'd love to hear your thoughts!