Global Equities

Stock story: Apple

The company is more than a seller of devices such as the iPhone. It’s about the services you access through them.

Apple is the world’s most valuable company by market cap. The company has achieved this feat by beating the curse that bedevils most hardware vendors, even tech ones such as Motorola, Sony Ericsson, Nokia and Blackberry. This scourge is that their products become commoditised. Apple has overcome this bane because its devices are not just devices. Apple’s products such as the iPhone can be better seen as ‘subscription’ payments to access Apple’s platform and services. Already 500 million people use Apple’s iOS platform and that number is growing at doubt-digits each year. 

It’s almost redundant to say that Apple enjoys strong brand recognition globally and has extensive market penetration – sales in fiscal 2016 reached US$215.6 billion. Along with Microsoft’s Windows and Google’s Android, Apple’s iOS is one of the major global digital platforms. As Apple and Google have the only two global mobile platforms and no third competitor is in sight, the pair is likely to connect the world between them. That market is already 3.5 billion users strong and is expected to expand to 4.7 billion users by 2020. While Apple’s iOS is not the leading mobile platform by number of users, it dominates among people who spend the most.

It can be said that iPhone sales are annuity-like because so many users have become Apple loyalists. This allegiance is driven by the switching costs associated with learning a new system, the desire of users to maintain access to iOS-only apps (such as FaceTime) and services (such as photo storage in iCloud) and the integration benefits of multiple Apple devices (such as iPhone and Apple TV). For all the potential around Apple Watch and Apple TV, iPhone and iPhone-related services comprised about 70% of Apple’s annual revenue and about 80% of Apple’s gross margin in fiscal 2016.

And then there’s the opportunity that Apple has to cross-sell services. As the average person in the US checks their mobile more than 45 times a day according to a Deloitte study in 2015, Apple can boost revenues by selling services such as Apple Pay (payments), HealthKit (health wearables) and HomeKit (home network connectivity). As well, Apple is poised to benefit from the growth in emerging markets, from where 30% of its sales come already.

Important Information: This material has been produced by Magellan Asset Management Limited trading as MFG Asset Management (‘MFG Asset Management’) and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision.

This material may include data, research and other information from third party sources. MFG Asset Management makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of MFG Asset Management. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.
Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of MFG Asset Management.

How to invest

  • Magellan offers two market-leading strategies, global equities and global listed infrastructure. Find out how easy it is to invest in the world’s best companies, as chosen by Magellan’s experts.

  • Global Equity Products

    You buy from the world’s best companies, so why not invest in them? Magellan offers a range of highly-rated global equity funds, containing some the world’s best companies that we believe are positioned to benefit from long-term investment tailwinds.

    Invest in global equities
  • Global listed Infrastructure products

    Infrastructure: Supporting you every minute of every day. Our range of top-rated global listed infrastructure funds are positioned to generate inflation-protected, stable yet solid returns.

    Invest in global infrastructure
  • Magellan Sustainable Fund

    Invest in 20 to 50 high quality global companies within a framework that considers ESG risks. The Magellan Sustainable Fund aims to achieve attractive risk-adjusted returns and preserve capital in adverse markets.

    Find out more
  • MFG Core Series

    Our range of lower-cost global equity funds, designed to offer investors a unique and compelling combination of active portfolio construction and ongoing systematic portfolio management.

    Find out More
  • Magellan FuturePayTM

    Investing for income and growth, particularly in retirement. Magellan FuturePay is an innovative new fund that aims to deliver a predictable monthly income that grows with inflation, capital growth with a focus on downside protection, a reserving strategy and on-going income support, and daily access to capital.

    Invest in FuturePay