Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Apple Earnings Preview: What to Watch This Thursday

By Gene Munster

We believe an upcoming paradigm shift in investing in Apple will move shares meaningfully higher over the next two years. Apple reports Sep-18 results on Thursday, November 1st. This quarter’s numbers could serve as validation for 3 of the 4 pillars of this new paradigm. We expect:

  • September iPhone units (48.1M vs. Street at 47M) to be a non-event, which would be further evidence that iPhone is becoming a stable business, performing more like software than hardware. This should mark the 8th consecutive quarter of iPhone unit growth in the -1% to +5% range.
  • The focus of the call to be commentary around iPhone ASPs in FY19, which we expect will exceed the Street ($791 vs. the Street at $756). Most importantly, while long-term iPhone unit growth will be in the low single digits, the company is finding new ways to make more money from their existing user base.
  • Services growth of 20%, in line with the Street. This is a step down from Jun-18 growth of 28% excluding one-time benefit from Google, given the tougher 34% y/y comp compared to 22% y/y comp in Jun-18.
  • About $25B in capital return, which supports a 3-year path to net cash neutral. The Street is generally expecting a 5+ year timeline.
  • No announcements concerning the fourth pillar of new product categories.


Similar to last quarter’s 3% guide up, we expect the midpoint of revenue guidance for the Dec-18 quarter to be 3% ahead of the Street, or $96B. The Street is currently expecting Dec-18 revenue of $93B and Loup Ventures is expecting $99B. The biggest difference between our estimate and the Street’s is our higher ASP assumptions. We are also expecting 3% iPhone unit growth vs. the Street at less than 1%, and margins to be in line with consensus at 38.2%

Exiting tomorrow’s new product event, Apple will have refreshed products that account for about 50% of revenue in FY19. This compares to last year when the company refreshed products accounting for 37% of revenue. This is a near-term (1 year) positive for unit growth and, while our estimates remain unchanged, our confidence in those estimates has increased. Lastly, we believe upside to Street ASP numbers will start in the Mar-19 quarter as interest in XR builds.

XR: Everybody’s iPhone

We expect the iPhone XR to be the most popular iPhone in 2019 (accounting for 38% of units), as consumers begin to see the phone in the wild and recognize its value. We believe the iPhone XR will be “everybody’s iPhone” because it’s a premium device at a more accessible price point, representing the greatest value in the iPhone lineup. Here’s our take on last weeks launch.

Despite being a better value, XR should still move Street ASPs higher in FY19, given our belief that the weighted ASP (factoring in capacity mix) of XR will be $796. This assumes the following XR capacity mix: 64GB at 42%, 128GB at 40%, and 256GB at 18%.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.

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