theStreetFika: Scones, Sips, Strategy & Stocks

Last week, Apple hosted its first event of the year and unveiled a slate of deliciously colorful products. But the star of the show was ... what we've been hearing rumors about for a very long time. Apple finally unveiled AirTags, little Bluetooth buttons you stick on things like wallets and keys to locate them (yep, just like Tile). They start at $29 each and will be available on April 30. AirTags use Apple's U1 chip — the same one used in iPhone 12. The chip will make AirTags trackers more accurate than those from Tile, Samsung, and Sony. Also AirTags use the "Find My" network, the same one used for Find My iPhone, Friends, etc. "Find My" is a crowdsourced network of hundreds of millions of Apple devices that can help users locate their missing tech through Bluetooth connection.  Bottom line: Apple’s powerful brand is a statement – that's currently limited to Apple devices. But with AirTags, people can slap expensive Apple labels on non-Apple products....

The iCar rumors are heating up again. In December, Reuters reported that Tim Cook is building a ridiculously techy personal automobile and now we finally know who the manufacturer might be. Spoiler alert: it's not Tesla or any of the other fancy car manufacturers). Similar to the rest of Apple's products, the "Apple Car" will be designed in Cupertino but Apple isn't building/assembling it itself. That honor will reportedly go to Hyundai-Kia. Tentative ETA for production: 2024. Of course, secretive Apple didn't confirm. Why does Apple wants to make cars? Apple's first car attempt, "Project Titan" (bold name), began in 2014 and crashed in 2019. So why is Apple trying again? In short, the TAM is huge. TAM is Total addressable market. It is the the total amount of money companies could make selling a specific product/service. Morgan Stanley put out a research note stating that while the annual TAM for smartphones is $500B, the TAM for global mobility...

One of the primary reasons I held on to my Tesla stocks during the “darkest days” of the Model 3 rollout was because I was certain either Apple or Google would acquire it. This is why I was very surprised when Elon Musk tweeted today that he wanted to sell Tesla to Apple but that CEO Tim Cook refused to take the meeting. Tesla isn’t the latest Apple acquisition bet that I got wrong though. That’d be Peloton. IMO, Peloton’s rally will outlive COVID. It's on track to ~$2B in revenue at the end of this year- that’s a year-over-year (YOY) growth of 100% - and yes the pandemic has helped a lot but the company projects to hit ~ $4B by the end of 2021. Since it IPO-ed, Peloton has had all the makings of an exceptional business that would be a great candidate for Apple to acquire. I was dead certain that it would be a matter of time before that happened, especially as Tim Cook pushed to quadruple revenues from Apple Services and turn it into a $50B per year business. Peloton ticks many of...

Nike shares jumped more than 35% since the beginning of the year. Nike is a pandemic winner and has been delivering impressive results, fueled by online sales that jumped more than 82% in the last quarter. Nike's ability to thrive during a period when physical visits to retail stores has collapsed is down to its investment in its direct-to-consumer (DTC) business. Per Statista , in 2010 about $2.5B Nike-brand products were sold directly to consumers. A decade later they sold almost $12.5B DTC – more than a third of all Nike brand revenue. The upside of DTC is alluring – it allows you to cut out the middleman (wholesale retailers) and, in theory, capture a higher profit margin for your business. But for Nike, it has been less about capturing higher margins and more about owning and controlling the full customer experience. What kind of company is Nike? They started with shoes, but their product line has extended far beyond that. They are certainly a marketing company, one of the bes...

Last week Apple announced a new iPhone . As with previous iPhone reveals, many greeted the event with a collective yawn, convinced nothing is innovative enough. I will not discuss whether the product revealed was innovative or not, as this is rather subjective and depends on the definition of innovation. Instead, I’ll focus on what I think is more meaningful: the change in Apple's business strategies. Is Apple a Services or a Hardware company? Apple has always been a Hardware company and its primary business model has always been to sell premium hardware at high margins. The chart above from  Chartr  on Apple's 2019 revenues seems to confirm this. It shows that over 80% of Apple's revenues  still come from the sale of hardware products ($214B vs. $46B from Services) with a sweet 55% of total revenues from the iPhone alone. However, the chart above doesn't tell the whole story. It doesn't say that Apple has doubled its revenues from Services in 3 years - revenue...

On September 15th, Apple announced Apple One and Apple Premier; two monthly subscription plans that bundle Apple’s premium services - Apple Music, Apple TV+, Apple Arcade, and iCloud storage, for either individuals or families. Premier adds on Apple News+ and Apple Fitness+. What is the strategy and motivation driving this announcement?  While Apple’s primary business model remains selling premium hardware at high margins, the company has a longstanding goal of increasing its services revenue. The latest bundles are all about the latter. Let me explain: They neither help Apple connect better with its customers nor reduce churn on Apple’s hardware (HW) products - not that Apple needs any help connecting with its customers or reducing churn. Apple is a darling for its customers and its churn is near zero. More importantly, they don’t aim at expanding Apple’s HW market share. They don’t make an iPhone (or any Apple HW for that matter) any more accessible and do not help in any way mov...