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Post by Deleted on Feb 18, 2013 16:59:05 GMT -8
An attempt to place a value on future markets for apple, and potential market cap ramifications for AAPL.
Hoping some of you will chip in with some thoughts of your own, constructive criticism welcome, alternative formulas wanted, alternative product scenarios welcome.
The list: (will update when more products added in additional posts)
Future Market 1: iWatch - estimated market cap increase - $30 - $40 billion.
Future Market 2: Apple TVs (screens) - estimated Market Cap increase: $75 - $100 billion. Future Market 3: Home Automation
Future Market 4: iBank / iWallet
Future Market 5: TBC
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Post by Deleted on Feb 19, 2013 14:43:54 GMT -8
Future Market 1: the iWatch - potential AAPL market cap value: $30 billion.
The iWatch - a seemingly real thing according to apple leaks reported by the WSJ, NYT & Bloomberg.
For the sake of this post, Im assuming that the device is not cellular capable (so is not a low end iPhone) and so would serve as a accessory to other iOS devices, and can function independently as a wifi only device, presumably with similar functionality to an iPod Touch, as well as of course being a time piece and fashion accessory.
How do we quantify the market size for a device like this? I think it would essentially replace the iPod nano in functionality and wearability, that would account for 15 million units annually max.
There also seems to be demand from some iPhone owners for a watch that is able to display alerts, notifications etc from your iPhone (as seen with the success of simple kickstarter projects). Lets be conservative and say that 10% of iPhone users would buy an iWatch because of the functionality of one of these, which would equate to at least 20 million per year.
Then there are people who would buy this as primarily a high end watch and fashion accessory. This is the tricky one to contemplate, it could be a very small luxury market in the single millions, or a new mass market trend in the tens of millions. I'm going to remain conservative and say 5 million per year.
So adding those up we have 40 million.
Next we have to,think about price. $199 is the current entry level price for iOS devices (the 4th gen iPod touch). I think that would be the minimum, and $299 seems like a maximum (perhaps there would be storage options).
I'm sticking with a minimum acceptable GM % of 30%.
At $199, 40 million units with 30% = $2.4 billion gross profit At $299, 40 million units with 30% = $3.6 billion gross profit
If you take the midpoint of $3 billion gross profit, with room to upside if GM% or shipment prove higher than estimated above to perhaps $4 billion annual gross profit.
Using a market cap valuation of 10x gross profit for this new potential product line would yield $30 - $40 billion in additional market cap.
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Post by Deleted on Feb 19, 2013 14:44:48 GMT -8
Future Market 2: Apple TVs (screens) - estimated Market Cap increase: $75 - $100 billion.
I've seen estimates for the global TV industry that quote figures around 240 million units a year.
If apple releases a screen itself, I think we can agree it will most likely be at the higher end of the price spectrum.
i would also argue it will increase the size of the market at the top end, as people who would normally not have spent the extra on a premium TV are pulled upmarket by apple. This will increase the profits available at the top end of the TV screen industry which at present is not overly profitable (a similar situation to the mobile handset industry before iPhone, and also similar to the PC industry)
I'm going to put a marketshare target number of 10% out there, and I think this number is easily achievable with a high margin, highly attractive apple product line of TVs, within 3 years of launch. The iPhone has managed a 10% marketshare penetration, and that is hamstrung by limited distribution (very limited in year 1), and being quite reliant on subsidies only available every 2 years to consumers on expensive contracts.
Assuming a little bit of market growth (partly driven by the apple screens), I think this 10% could be considered 25 million TVs annually.
To put that in perspective, there are already over 500 million iTunes account users, and over 500 million iOS devices have been sold. 25 million TV sales would equate to less than 5% of the current growing apple ecosystem users.
I also think apple would not accept any gross margin below 30%.
So to judge the value of this market to apple, we need to guess some ASPs for Apple screens. I'm thinking $1000 minimum entry, which is actually a very conservative price considering the price of current "smart TVs" from Samsung etc, which can exceed $2000.
So using my conservative numbers above we get the following:
25,000,000 units per year, selling for at least $1000, with at least 30% gross margin.
Gross Profit equals 25,000,000 x $300 = $7,500,000,000 gross profit.
That $7.5 billion excludes any accessory sales, media & app sales, and AppleCare warranty revenue.
Allowing for this extra ancillary revenue, a slightly higher ASP, a slightly higher gross margin %, I think we can see a potential $10 billion in gross profit.
How does one value a potential new market worth $7.5 - $10 billion in annual gross profit, with continued long term growth prospects?
IMO I think when/if apple announces a line of TVs, I think its good for a market cap value of 10x medium term annual gross profit potential, in other words $75 - $100 billion market cap gained within 12 quarters of launch.
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Post by Deleted on Feb 19, 2013 15:42:33 GMT -8
Future market 3: Home Automation
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Post by Deleted on Feb 19, 2013 15:42:48 GMT -8
Future market 4: iBank / iWallet
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Post by Deleted on Feb 19, 2013 15:43:03 GMT -8
Future market 5
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Post by rickag on Feb 19, 2013 17:47:58 GMT -8
Home server.
The hub for TV, Stereo, phones and less expensive dumb terminals for internet, computing, gaming.
Controls inexpensive devices from thermostats to lighting to alarm systems.
All wireless, massive easy syncing all devices and connection to the cloud.
Siri interface for every room < $50 communicating wirelessly to the iHub.
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Post by bloodylongaapl on Feb 20, 2013 2:42:56 GMT -8
Instead of a new category, should iWatch instead be considered as a replacement for the fading iPod nano and shuffle, but with wearability and significantly increased functionality? How does that fit with your modelling?
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Post by qualitywte on Feb 20, 2013 18:37:13 GMT -8
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Post by Deleted on Feb 21, 2013 22:17:55 GMT -8
Home server. The hub for TV, Stereo, phones and less expensive dumb terminals for internet, computing, gaming. Controls inexpensive devices from thermostats to lighting to alarm systems. All wireless, massive easy syncing all devices and connection to the cloud. Siri interface for every room < $50 communicating wirelessly to the iHub. I've popped home automation as future Market 3.
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Post by Deleted on Feb 21, 2013 22:19:15 GMT -8
IBank / iWallet added as future market 4
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Post by Deleted on Feb 21, 2013 22:26:01 GMT -8
Instead of a new category, should iWatch instead be considered as a replacement for the fading iPod nano and shuffle, but with wearability and significantly increased functionality? How does that fit with your modelling? I think that is exactly how the iWatch was developed internally, but marketing as a new product and category will position it as a much bigger market. I do think it will cannibalise iPod nano sales, but considering that is a slowly dying product line, I think the ipod nano currently has very small market cap valuation, whereas the iWatch will be a new growing product line and as such should substantially contribute to market cap and future earnings growth.
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