Apple’s stock has been on a downward spiral lately, amidst concerns about the company’s future and a couple of inaccurate reports. Most analysts, who were at once very optimistic about Apple, have now lowered their stock price predictions for the company, but Chris Whitmore from Deutsche Bank maintains his “buy” rating for AAPL stock.
Why is Whitmore optimistic about Apple’s future? Customer lock-in.
Almost all of the content you buy through iTunes is locked into Apple’s own devices. Apps work only on iOS devices, the books on the iBookStore only work on iOS devices, iCloud isn’t cross platform, iMessage and FaceTime aren’t available on Windows or Android, and even the content that is available on Windows (songs, music, movies) tends to work better on iOS and the Mac.
The significant investment an average iOS user makes in buying apps and other content through iTunes becomes a huge barrier when trying to switch platforms. An iOS-to-Android convert would have to spend time and money all over again to figure out which apps to install, find a way to get songs bought through iTunes to Android and get back the data that’s been stored in iCloud. (Whitmore estimates the average investment of an iOS user towards iTunes content at around $130.)
Apple’s seamless experience along with its “lock-in” ensures that customers “stick,” and continue to invest in hardware upgrades:
The key underpinning of this view is the stickiness of the iOS platform and the substantial and growing investment (both time and money) Apple users place in it. Although the U.S. phone market is well penetrated, we see substantial opportunity for Apple to grow its user base in emerging markets and further monetize existing iOS users through the living room (Apple TV, additional content, etc.).
Separately, another stock expert, Aswath Damodaran believes that Apple’s stock at its current price of $440 is under valued.
What’s your take on this? Are investors failing to realise the true value of Apple? Or are their concerns about Apple’s future legitimate?