Apple Inc
Martin summarized recent channel checks related to Apple. Insights from several ex-employees of Apple are summarized first, followed by insights from a key competitor.
The most important valuation-related takeaways from Martin's conversations included the fact that the smartphone replacement cycle is now closer to 36-40 months, up from about 24-30 months pre-COVID.
Some noted that Apple would raise prices on high-end smartphones and use that excess pricing to subsidize lower-cost iPhones to attract new consumers into the Apple ecosystem.
This is because high-end smartphone customers are typically less price-sensitive, and Apple needs to reach a new base of consumers to grow its installed base.
The smartphone market in the U.S. is saturated, and competition is ruthless, Martin flagged.
The global smartphone market saw a 12% decline in 2023, with Germany reporting a 17% decline, the U.K. a 14% decline, and the U.S. market an 11-12% decline.
Emerging markets like India are still reporting growth, owing to lower smartphone penetration.
The smartphone renewal cycle has extended from 24-26 months to 36 months due to pressure on consumer spending post-COVID smartphone market saturation.
This trend is especially evident in the U.S., where everyone owns at least one smartphone, the analyst picked up from the conversation.
Martin noted that the percentage of devices sold through Apple stores and Apple.com has increased over the past seven years.
The first-party channel has become more important, especially for Mac and iPad sales. Outside its owned stores, Apple's consumer retail channel strategy in the U.S. has become increasingly concentrated in a handful of partners.
Apple has dramatically lowered its dependence on other channels.
Martin noted that by reducing the number of retail channels it uses, APPL can use this "rarity" value and market power to dictate better terms with the distribution channels it keeps.
Martin projected fiscal 2024 revenue and EPS of $387.10 billion and $6.62.
Price Action: AAPL shares traded higher by 2.99% at $216.90 at the last check Monday.
