Post on 15-Jan-2015
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How Apple Can Keep Growing at 90% AnnuallyThe Next Growth Areas
March 15th 2012
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Table of Contents
• Isn’t Apple Too Big To Keep Growing This Much?
• How Is It Possible?
• What are the Growth Areas from Existing Portfolio?
• What are the Greenfield Growth Areas?
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Why Apple Can’t Keep Growing
• Why Apple Can’t Keep Growing:
• Unprecedented
• Too Big
• No More Steve Jobs
• Everyone likes it; it’s a bubble
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Why Apple Can Keep Growing
• Why Apple Can Keep Growing:
• Unprecedented But no company this big has had these opportunities
• Too Big Yet all Apple does is win
• No More Steve Jobs Yet Steve’s greatness masked how good rest of the team is
• Everyone likes it; it’s a bubble Still cheap with a forward P/E of 11x and a trailing P/S of 4x
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Apple Quarterly Growth Y/Y in Net Earnings
It Can’t Be Done – But They Keep Doing it
Dec 10 Qtr Mar 11 Qtr Jun 11 Qtr Sep 11 Qtr Dec 11 Qtr0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
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Projected Apple Net Income in $B – 90% Y/Y vs. 65% Y/Y
How Is It Possible To Keep Growing Earnings 90% per Year?
Y2011 Y2012 Y2013 Y2014 Y20150
50
100
150
200
250
300
350
400
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Units Sold in Millions
Apple Products Sold In Last 3 Years
Y2009 Y2010 Y20110
10
20
30
40
50
60
70
80
MaciPodiPadiPhone
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What are the Growth Areas from Existing Portfolio?
What are the Growth Areas from Existing Portfolio?
• Macs
• iPad
• iPhone
• iTunes
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Mac Growth
Mac Growth:
• One of the most ignored parts of the Apple portfolio
• Has consistently grown faster than the PC industry
• Grew Revenue 26% Y/Y in the Last Quarter and 22% for Last Year
• PC Industry growing 10% annually
• Huge opportunity to grow market share in the years ahead
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MM of units sold or projected
Mac Halo Effect to Speed Up
Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 Y20150
10
20
30
40
50
60
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iPad Growth
iPad Growth:
• New Category created from scratch 2 years ago, now 20% of Apple’s revenues
• 55 million devices sold since inception
• Likely 58 million iPads will be sold in this fiscal year
• iPad trying to achieve iPod market share
• A 500 million tablet market in 2015 means 300 million iPads with 60% share
• For comparison, 409 million PCs were sold globally in 2011
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MM of units sold or projected
From Nothing to 300 Million Units Sold in 7 Years: iPad
Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 Y20150
50
100
150
200
250
300
350
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iPhone Growth
iPhone Growth: Driven By Smart Phone Adoption
• 53% of Apple’s revenues from announcement 5 years ago
• Likely to remain 44% of Apple’s revenues by 2015
• Smart phones will be every person’s dominant computing device
• 72 Million iPhones sold last year, yet could sell 6x that in 2015, assuming 1.5 billion smart phones will be sold and Apple retains a 32% share
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MM of units sold or projected
10x 2010’s iPhones To Be Sold in 2015
Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 Y20150
50
100
150
200
250
300
350
400
450
500
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iTunes Growth
iTunes Growth:
• After Macs, the most easily forgotten part of the Apple portfolio
• iTunes had $2 Billion in net sales last quarter; Facebook had $1.1 Billion
• iTunes last quarter of revenues was 1/5th the amount of Google’s total revenues
• iTunes growth tags along from the number of active iOS devices
• If devices explode, so will iTunes $32 Billion in revenue by 2015
• Will they do something different for iTV?
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iTunes Revenue Set to Explode
iTunes Revenue Set To Explode with New iOS Devices Sold
Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 Y2015
iTunes 4.03 4.94 6.314 9.82359675 14.735395125 21.882061760625 32.09369058225
% of Rev 0.0939284465679991
0.0757378305864316
0.0583284834040037
0.055 0.05 0.045 0.04
$2.50
$7.50
$12.50
$17.50
$22.50
$27.50
$32.50
$B
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What are the Greenfield Growth Areas?
What are the Greenfield Growth Areas?
• iTV
• iAd
• iPay
• Siri
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Projected future TV and PC Growth – in MM of units sold
iTV Growth: The Market for PCs and TVs Today
2011 2012 2013 2014 20150
100
200
300
400
500
600
700
TVs SoldPCs Sold
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iTV Growth: The Meeker Effect is Real
iTV Growth: The Meeker Effect is Real
Year 1 Year 2 Year 3 Year 4 Year 5 Year 60
20
40
60
80
100
120
140
iPhone iPad iTV
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iAd Growth
iAd Growth:
• Apple has seemed to be conflicted about getting into Ad business
• Jobs referenced need to help developers and making quantum leap in ads as reason for Apple to do it
• Jobs was right though that the key is Emotion and Interaction
• We’ve yet to really see this though from ads – even from Apple
• If Apple is going play a central role in TV, they need to step this up
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iPay Growth
iPay Growth:
• Huge inefficient market waiting to be disrupted
• Unlike Google, Apple waiting to do this right
• PayPal expects Apple’s entry and has been seeking to differentiate itself as vendor-neutral mobile payment provider
• Will require more than a credit card linked to an iTunes account
• Just shaving off the percentage fees to credit card companies would save Apple billions from its retail stores
• Could decide to do something totally new in mobile location payments area
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Siri Growth
Siri Growth:
• “Google Killer” as it bleeds away reliance on desktop index search to get information
• Siri itself won’t be a money-maker for Apple
• But it will build powerful loyalty among users to Apple products
• Even more powerful when it becomes the interface to your TV and your house
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Projected Apple Product Mix in 2015
Projected Apple Product Mix in 2015:Mac8%
iPod0%
iPad20%
iPhone44%
iTV16%
iTunes5% iPay
3% iAd3%
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In $B
What Will $610 Billion in Annual Revenue Look Like in 2015?
iPhone iPad iTV Mac iTunes iPay iAd iPod$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
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Apple’s Price-Sales Ratio Over Time: Likely at a Top Now
Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 Y20150
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
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Conclusion
Conclusion
• At a 2.5x compressed price-sales multiple, Apple can easily get to a $1.53 Trillion market capitalization by 2015 – or $1,646/share representing a 183% increase over today’s price
• iTV’s growth should exceed the success of iPad
• Feature phone decline opening door to massive iPhone growth
• iPad could be close to the current size of the PC industry in a few years
• Macs will grow share in PC industry through Halo Effect
• iAd and iPay are wildcards here; both have potential to be massive