By Gene Munster
Apple (AAPL) announced (October 18th) a special event in Brooklyn on October 30th. This is the fifth time in seven years that Apple has hosted two fall product events. Typically, the second event is less impactful than the September iPhone launch. That said, the collective upcoming product announcements will have an incremental impact on Apple’s overall business.
- We expect the event to over-index to refreshes of products used by creative professionals, based on the numerous artful event invite designs and the “making” reference.
- This likely includes a new, lower-cost MacBook, new iPad Pros and Mac Mini, along with an outside chance of an iMac refresh.
- Collectively, we estimate these products account for about 10% of Apple’s overall revenue (Mac and iPad segments in total will account for 17% of revenue in FY18).
- Exiting the October 30th 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.
The Bigger Picture: Apple as a Service
Though the October event is incremental to Apple’s business, the specifics are less relevant to Apple’s long-term (> 1 year) valuation. Taking a step back, the historical view is that shares of AAPL move higher in anticipation of new products and trade off after they are announced. Investors are increasingly less focused on the latest features around product announcements and more focused on the ability of these products to retain and slightly grow its current user base with increasing revenue per user. We call this emerging view Apple as a Service: stable iPhone business, Services growth, a significant capital return, and new markets.
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.