Apple Inc. (NASDAQ:AAPL) announced its new line of iPhones on Sept. 13, while the Southeast remained blacked-out by Hurricane Irma. The iPhone 8 seemed tame, the Apple Watch seemed small. The big news was the Apple iPhone X.
The iPhone X packs everything Apple could know or buy about smartphone technology into one sleek package. But it’s going to cost you. A lot. Try $999 for the base model, but you’ll want to spend $1,149 for the one with ample memory.
Some reporters got snarky about this, comparing the struggle to justify the purchase decision with Kubler-Ross’ five stages of grief. But for AAPL stock investors it’s more important to look at what this means in the history of technology.
AAPL and the Great Switch
A decade ago, when the iPhone was launched, the PC was the basic unit of computing, and the phone in your hand was a peripheral.
Buyers could easily justify the $1,000 or higher price of their PC because it was their work machine. It was their interface with the world, it was where their internet lived. A phone was something you talked through.
Today, all that is reversed. The PC is the peripheral. That’s why the Chromebook, using software from Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), is such a hot item. The Chromebook costs just a few hundred dollars, and it makes up for lack of hardware power by connecting to the cloud. A Chromebook without a wireless internet connection is a brick, but you now assume the connection. I bought one, and during the recent blackout it was how I got my work done.
It’s the phone that’s the center of our lives. While Georgia was blacked-out, I saw dozens of people walk up and down my street smiling, looking at their phone screens. They were in touch with the world. Everything was going to be OK. Crime did not spike, people did not panic, because the phone has become the center of our lives.
This is not news. Facebook Inc (NASDAQ:FB) is worth a half-billion dollars today because it turned to mobile quickly, making that and its cloud investments the centerpiece of its strategy. This has become an impregnable moat.
Thus, $1,149 spent on a great phone is the same as spending the same amount on a good PC a decade ago. It’s the PC that’s the peripheral.
The Meaning for AAPL Stock
As CEO for six years now, Tim Cook has drawn criticism. He is considered a smart manager but a dumb innovator. The new “Spaceship” campus could have been designed in the 1950s. An iPhone X looks a lot like the iPhones of 2011.
But underneath that, Cook has overseen a revolution in global life. Anyone can now join the global economy with a smartphone and an internet connection. An Apple iPhone today represents the upper level of global consumer aspiration.
More important, from a financial perspective, is Cook’s big bet on the cloud. Services now represent nearly one-third of AAPL stock’s revenues. The company didn’t invest in cloud data centers under Steve Jobs.
The Apple Watch 3 represents the company’s future. At $399, it’s only now becoming what it was meant to be: an intimate, independent piece of technology that can monitor your health, do everything Dick Tracy’s wrist radio could do and more.
At its Sept. 14 opening price of $159, you’re paying a market-matching 18 times earnings for AAPL stock, with year-over-year revenues growing at nearly 10%, over one-quarter of revenues coming to the bottom line and an affordable dividend now yielding 1.58%.
You can call it Peak Apple. I call it Everest.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in FB.
