Since it seems like the season of anecdotes, I will also chime in.

I thought iPhone 7 was good enough until I tried the iPhone XS. It is far superior in every way over iPhone 7, and I am very happy I made the purchase.

The webpages load before I say blink, the screen is big, and I am enjoying reading books on it now. Other than that the camera is excellent and better everyway over my old iphone. I am not making this stuff up.

I upgraded from an iPhone 7 to an iPhone XS and FaceID and the faster processing speeds have been huge improvements for me too.

I find myself frustrated now when I am using a mobile device that doesn't respond as quickly and efficiently as my iPhone XS. The speed at which apps open/websites load, and the accompanying battery life... huge fan. My iPhone 7 would last until about 7 PM before it needed another charge, my XS lasts all day + night and I find myself using it more than I did my 7.

It’s still a replacement phone vs an upgrade phone. When you need to replace, get the latest, otherwise no urgency to upgrade.

I also went from 7 to X and it was a massive upgrade. The speed alone, but the screen is where I really noticed it.

Yet, somehow BMW successfully sells new cars with minor changes every year. Eventually in the premium market it's less about the upgrade vs simply having a new device.

The question is what peoples upgrade cycles will look like. IMO an average around 4 years is probably about right for cellphones.

BMW has solid and reliable market share, but it's small. Toyota also sells new cars with only minor changes every year. And they make four times as much money doing it.

No one questions whether or not Apple will continue to make good premium phones, just if their market capitalization is appropriate for a company that makes only premium phones.

Toyota also makes premium cars. The average selling price of a new vechile in the US is 36,000$ per year which means the market for premium cars is huge.

Now, the question becomes can you sell a premium Android phone? And based on current sales not really. Companies have flagship products, but they don’t sell that many of them because they don’t have significant advantages over far cheaper devices.

> Now, the question becomes can you sell a premium Android phone?

Sorry... why does that become the question? The issue at hand is whether Apple can justify a trillion dollar market cap (now down to about $750B) on its almost-entirely-premium phone sales. Whether it has meaningful competition in the premium phone sector isn't really relevant. Android can be nothing but Huawei junk and AAPL would still be overpriced.

> why does that become the question?

If Apple becomes BMW with several other companies eating up significant shares of the premium market then Apples market share drops. However, if Premium Android phones continue to be minor players the Apple can continue to be a dominant player.

Currently Android is actually losing market share in many countries even as Apple raises prices.

And I repeat: Android market share could drop to zero and the existing size of the market for $500+ phones would not be enough to justify AAPL's trillion dollar market cap. Like most tech stocks, Apple's cap had priced in the expectation of growth. But that's what this warning is about: no growth. So the cap is going to shrink to a level that the market feels justifies the sustained revenue (currently $680B, but that's no doubt going to bounce around a lot in the coming weeks).

It's not about who's phones are better.

Apples P/E ratio is 12 to 20 that’s not a growth stock. In the start of 2008 when it hit 40 that was growth territory. But it’s fallen as low as 9 in 2013.

And that’s ignoring the 180 billion or so in assets on a 684.07B market cap. The only way those numbers are rational is if people are expecting sales to tank.

It's not a growth stock now. It was before. Are you missing the part where it's dropped from $1T to $750M over the past three months, and now to $680 given the earnings warning today (which basically validates the earlier motion)? It's literally the subject of discussion...

At 1T it’s still not really a growth stock.

20 P/E is the edge of growth. Consider a utility with steady 5% returns + inflation is often an appealing option for people looking for steady returns. This always depends on what options are available.

Further the entire market is down which changes expectations. The Dow going from 26,800 to 23,300 would mean a drop from 1T down to ~869 billion.

Yep, people think Apple is slightly worse off now. But, Apple has been stuck as a relaticly high volatility value stock for a while. The expectation is lots of profit, but little real growth.

That... what? That's just wrong. Look upthread for your example that started this whole thing. BMW's P/E is less than 6! Toyota's is around 7. Apple is absolutely priced like a growth stock. No, it's not as high as better growth bets are, but it's absolutely not priced by earnings. It just isn't.

Both those car companies are facing serious long term issues. Yes, the numbers today look ok, but expectations are not looking good.

  US MBW market share, is just one indicator.
  2014	2.06%
  2015	1.98%
  2016	1.79%
  2017	1.77%
 

They are also shrinking in Europe, though this is offset by emerging markets. But, relative to the industry they need a turn around.

TOYOTA: Car decline overshadows light-truck gain https://www.autonews.com/article/20181002/RETAIL01/181009878...

With a slightly down market:

  Dominion Electric is 16.08
  Proctor and gamble is 23.66 

Proctor and gamble has some growth but it’s stock is up 50% in the last decade. It’s doubled in the last 20 years which is some growth but not much.

It’s not overpriced because people agree and pay for its fair value.

The question is if enough people “agree and pay for its fair value” to justify the existing market cap. And Apple just told investors, “nope.”

-typed from my iPhone...

The average price doesn't really tell us anything. I got that the luxury car share is less than 6% when googling quickly. If the luxury phone market is only 6 percent and Apple doesn't even have all of that it wouldn't look good for them. Though one caveat is I have no idea what I'm talking about here. https://www.google.com/search?ei=V5ctXKnYNY3aswXP-72AAw&q=ca...

Premium is not nessisarily luxury.

Anyway, the average tells you a lot. To simify, if the cars sold for 20k, 20k, 20k, 20k ... with one selling for X million. The that X million car eats up 16/36 = 44.5% of the value. Further, if the margin is low on 20k cars and high on X million dollar cars then it’s more profitable to just sell the one car.

You can play with these numbers, but generally the median is well below the average. So, by revenue 50+% of the market is for 40+k vechile which a premium product. At least compared to a 16k Yaris which gets you from A to B just fine.

None of the top 10 best selling cars in the US [1] are what I would call “premium”. Do you really see a $36k Toyota Camry as being above average?

I’m not saying the price isn’t insane, but there’s a big gap between that and a mid-range 7 series for $96k.

1: https://focus2move.com/usa-best-selling-cars/

Volume is not nessisarily profitable.

Sell 10 million cars for 20k with 5% margins or 2 million cars for 40k with 10% margins. Do the math the second makes you more money even selling 1/5 the cars.

Also, you might look down on a 36k car, but it’s several steps up from a 16k Yaris which would get you from A to B.

I never said it was more profitable, I was disputing your argument that a $36k car is "premium", which means your analogy comparing Toyota to Apple was poor at best.

I also did not look down on a $36k car - if you read my comment I actually did quite the opposite - but my opinion isn't at all relevant, since we're talking about the majority of buyers (in this case in the US) when it comes to buying expensive "premium" products like cars and phones.

Premium is a marketing strategy. A base Toyota Camry is 22k and that’s the price point you’re buying dependability / utility. The marketing changes as you move up the price point even before you hit the ultra premium price points. An easy way to look at this is Advertising as a percentage of total sales. If you spend 10% on advertising you could instead lower the price by ~10%. Dawn dish soap does not spend millions on advertising because it feels good, they are well past the point of people being aware of their product.

https://en.m.wikipedia.org/wiki/Premium_pricing

Ex: ‘It does not just raise the bar, it is the bar’.

Believe it's still the most reliable model of vehicle that exists in the West.

Problem is Apple has based its strategy and forecasts around 1-2 year upgrade cycles rather than 4.

BMW doesn't raise the price of their cars every year, let alone at the pace of 30%. Should that happen to BMW, I guess the consumers will happily take their business somewhere else. It is impressive enough that Apple can keep doing this for this long and only until now we see a substantial backfire of its action.

And those car manufacturers don't have a margin that as lucrative as Apple's, which is 38% in the letter.

WRT stock price and valuation, the current pricing generally assumes a much more frequent upgrade cycle, so even if this makes more practical sense, it means that AAPL will lose a lot of value in the transition; their transition to offering more in services is a sign that their hardware innovation has probably reached a relative maximum.

I don't think BMW has nearly doubled their prices over the span of a few years.

I think the idea is that they've just, or are moving towards, 'Luxury' pricing. Not to compare the two companies prices directly.

I don't think people buy a new BMW every few years.

No, they lease them. That's actually pretty close to what Apple wants to do as well (Tim even noted it in his CNBC sit down).

If you can’t see improvements between the XS and the 7, I’m very surprised.

However I do agree with the general point. The differences are getting less and less significant, and we buy new devices only when they make a meaningful difference to our lives.

I'm the opposite. I love all of the new hardware.

1. I went from the 6S -> XS

2. 2015 MBP -> 2018 MBP. The only annoyance was the touch bar in Chrome.

3. Apple Watch Series 0 -> Apple Watch 4 LTE. I can track my surf sessions and take texts/calls in the water.

If you think Apple products are quality, especially on the mbp, is superior, you need to try a high-end pc. Don't compare a $3k mbp to a $1k PC.

Apple have also alienated a lot of people by not supporting an open physical standard for headphones. The day I can use the same headphone jack (3.5mm or USB-C) on my laptop and iPhone is the day I upgrade from an iPhone 6s.

Plus, the carriers are encouraging SIM-only sales and for people to finance their own phones. So the 24-month upgrade cycle has been somewhat broken there.

This trope is like 2016 (or whenever the hell it was) either way it’s old and it’s dumb. Buy a dongle, attach it to your headphones and leave it or get air pods. That is what the market is doing. I mean I’m not thrilled with lack of a headphone jack but the overall market for iPhones doesn’t really care.

Its not old and dumb - Apple introduced USB-C in the iPad Pro. I won't buy a new iPhone until it supports it as well.

Anyone that doesnt adopt innovation ends up holding onto archaic technology. The same people judged for the removal of CD drives. It’s usually always a minority voice and it doesn’t have much value in the overall trend of technology and market adoption.

The technology is exactly the same. They just eliminated a standard connector from their design and now require you to supply your own DAC; either as a dongle or integrated into the headphones.

It is in fact not exactly the same. Because the innovation allows slimmer, lighter design and pushes society to adopt wireless which is ultimately inevitable.

The only reason I'd seriously consider upgrading is if they fixed the typing speed. The input latency on iPhone has just _horrible_, and I know after another iOS update it'll be just as bad.

I taught myself to touch type at about ~80WPM with my thumbs, and how I have this bad of habit of typing a full google search query, and just staring my phone for 90seconds until all the text magically fills in and my phone shakes with haptic feed back that should've occurred nearly 2 minutes ago.

It is such a cheap experience I had to turn haptic feedback off because its not even remotely synced to touch inputs.