Apple Event 2023: Here's what to expectSep 12, 2023
at Barclays, uh, Tim, it's good to have you
here. I guess, first of all,
expectfrom the product launch? and then how much is this going to move the needle? I mean, one of the story lines with Apple has been how you know the update cycle has gotten longer and smoother over time, so
expectfrom this generation? Sure, thanks for inviting me. I would say that, in general, we are analyzing this cycle, which we will find out about tomorrow. more so you know the traditional s cycle, so we think t
herewill be some iterations on the usual battery design, the camera processor, things like that should improve.
I think a lot of the discussion will revolve around two things, one is price, we do it. I think particularly about the Pro models, given the new technology there and inflation, we will see a price increase and the second will be availability. We've got back number one, weakened demand, but number two, some supply chain issues, so we do it. I think availability might be a bit of an issue that people could look at as to how demand is going for this new cycle and what you think the price sensitivity really is. I guess the high end phones are pushing. limits, do you feel that installment plans mean people will just get the new one when it's available?
Yeah, look, I think Apple has proven a lot of people in the industry wrong over the years, by showing that they have really strong elasticity, I think. Asps on average have increased between four and five percent per year over the last decade, which normally doesn't happen in the smartphone world, so they are approving the power of the ecosystem, however, what that does is particularly difficult. macro environment at the margins, uh, it affects demand, so I think it's a you know, for the core base of uh Apple Fans out there who like to get the new products, they will pay for them, but uh, when it comes competing for that mid-market tier, maybe with some high-end Android phones that might be cheaper, is a little bit more challenging, so I think over time we think that somewhat limits the addressable market, if they continue going up in the market, but it has actually worked for them, they have been able to push prices up, this could be a little more dramatic again, considering the macro context that we are in now, yes, I suppose it will. "The test, I mean, the stock has performed even with this pullback, it's had a pretty severe pullback, a little bit sharp, it's up almost 40 percent this year and that's without really any consensus expectation on stock growth." earnings for the current fiscal year.
It's unclear exactly how quickly." We'll go next year even with services and things like advertising doing well, so how do you see the stock as positioned here with all that? Yes, it's a little disconcerting. I mean, we expect to see a drop in revenue in December, year over year. for the fourth quarter in a row, our model only goes back 20 years and that hasn't happened in the last 20 years, so here we are in uncharted territory, from a performance standpoint, we're hearing, you know, picking up an Un little more caution, if you look at what's happening in China, there will be some competitive phone launches and we just spoke and we've seen lower sales, so we think demand is an issue at the moment.
We are on the sidelines here, we are showing a little more disadvantages than advantages. You also know we talked about this Google case, Apple Tap, which is launching tomorrow as well. Department of Justice, so we. I still see some real risk to some of those lots in the services business, which obviously gives Apple the really deep multiple that it enjoys today, yeah, so it refers to this case where, of course, Google Apple pays a large sum annually to be the default search provider on iPhone, so how do you think that plays into this thesis? Do you think there is a genuine risk of that income stream disappearing or diminishing?
Yes, I think it is very difficult to predict what is going to happen in a case like this, there have been two places in Europe and in India, on Android, not iOS, where the government has said that it is not allowed to have an attack that have traffic acquisition costs, so they are not allowed to pay to be the default browser, so we have seen some governments take action in this regard. It is a high risk game. We think that's $20 billion in revenue for Apple. They are practically all profits, so they represent about 10 of your income.
Of course, that's a cost element for Google, there are a lot of moving parts here, ultimately maybe Apple wants to do its own advertising and monetize searches, so that could be something in the future where they integrate vertically. , But for now. This partnership is significant for both parties and any risk to it is material or at least a risk to Apple's service numbers, yes even for Apple, $20 billion is a lot of money in any given year, Tim, thanks. I really appreciate the time
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