Connect with us

Technology

Gene Munster says Apple looks like a consumer-staple company

Editor

Published

on

[ad_1]

You likely don’t think of Apple as being in the same category of companies as Coca-Cola, Procter & Gamble, and Philip Morris, but Gene Munster thinks it has more in common with them than many people realize.

Better yet — in Munster’s book, Apple’s stock could soon start trading like those consumer staples.

Like those companies, “Apple has a more predictable business than it may have historically been and was thought of,” Munster, a longtime Apple analyst who is now a managing partner at venture capital firm Loup Ventures, told Business Insider in an interview

He continued, “Over the next few years, it could see a multiple like a consumer staple.”

Indeed, Munster thinks Apple next year will outperform its big-tech peers in the group of FAANGs — Facebook, Apple, Amazon, Netflix, and Google owner Alphabet.

Read this:Longtime Apple analyst Gene Munster thinks the iPhone maker will reclaim its crown as the best tech stock in 2019. Here’s why. That may seem like an insult. After all, Apple is a tech company, and such businesses often trade at several dozen times their expected earnings. By contrast, consumer staples are often thought of as stodgy companies that aren’t accorded such high premiums by investors.

Consumer-staple companies trade at a premium to Apple

But Munster, who doesn’t own Apple shares, thinks it would be a positive for Apple’s stock if it started being placed in the latter category. On average, the consumer-staple companies in the S&P 500 trade at about 16 times their forecasted earnings for next year and top-tier companies in the sector, such as Coke and P&G, are accorded a multiple of 20 or more.

Apple looks like a consumer-staple company, said Gene Munster, a managing partner with Loup Ventures.
Brian Ach/Getty Images for LocationWorld

While there are high fliers in the tech sector, such as Amazon, which is valued at more than 50 times its predicted 2019 profits, the tech companies in the S&P 500 trade at less than 14 times their expected earnings. And Apple itself now has a multiple of about 11.

So, if investors start thinking of Apple as a consumer staple, its stock price should appreciate markedly. If Apple were trading at the average consumer-staple multiple, its stock would be at around $214 a share, instead of $156.

And Munster is convinced that’s going to happen. Apple’s stock has been weighed down by its iPhone business. The overall smartphone market has started to decline, in terms of units shipped, and Apple in particular has faced concerns about soft demand for its latest iPhones.

But the company is in the process of redirecting investors’ attention from the number of smartphones it sells to its overall revenue, Munster said. When investors realize that number is continuing to grow — regardless of what’s happening with the number of iPhones it sells — they’ll start to feel more comfortable with its stock and valuation, he said.

“Over the course of 2019, investors will take away that this is a reliable business, and this deserves a higher multiple than the smartphone business,” he said.

Apple wants investors to pay attention to its services business

Apple announced last month that it would no longer disclose the number of iPhones, iPads, and other devices it sells, instead disclosing just its revenue from selling such products.

The company and many of its backers on Wall Street have been arguing that the number of devices it sells is becoming less important as the prices of those devices has gone up and as it has started to bring in significant revenue from other parts of its business, particularly its services offerings. Those include subscription products such as Apple Music and iCloud storage, as well as the commissions it gets on sales of apps through its App Store.

Munster thinks there are good reasons to be optimistic about Apple’s services business. Its customers are paying more for apps, which means Apple is making more money off such sales, he said. And it’s poised to launch a subscription streaming video offering next year, which should bring in additional revenue.

But that business alone isn’t why investors will give Apple’s stock a higher multiple. Instead, Munster thinks investors will come around to the idea of Apple’s business as a whole being akin to a subscription service offering, one with steady, reliable, and recurring revenue.

But its iPhone business is an important part of the story

Apple’s iPhone business accounts for more than 60% of its total revenue. Munster thinks that business will remain stable.

The company created some concern among investors and analysts in its last earnings call when it announced that it would no longer release its iPhone unit sales, and offered disappointing guidance for the holiday quarter. Many on Wall Street interpreted that as a sign that its iPhone sales would decline, and worried that the company was on the wrong side of peak demand for the product. Other electronics companies have seen their sales plunge after their products hit peak demand.

But Munster doesn’t think that will happen to Apple.

Companies such as BlackBerry and Nokia saw their sales fall because something better or cheaper came along that undermined the market for their key products, he said. But that doesn’t seem to be the case with Apple, at least not right now. Smart glasses or other wearable products that could steal sales away from smartphones still seem years off, he said. And cheaper phones, such as those from Huawei and Xiaomi, don’t seem like they’re really attracting iPhone customers, he said.

The iPhone plus services is a compelling story for investors

Instead, what seems to be happening with Apple is that its customers are starting to wait longer to trade in their iPhones for new ones, Munster said. But they are and will continue upgrading their devices on a regular basis, he said. And that business could become even more service-like if Apple builds on its iPhone trade-in program to offer iPhones on a subscription basis, he said.

“I think Apple pretty well has their base locked up,” he said. At least for the next year, he continued, “There doesn’t seem to be anything out there that will shake that base.”

On top of that steady iPhone revenue stream, Apple has its fast-growing services business and it has the potential for a “wild card” that could significantly boost its sales in the form of either existing products such as the Apple Watch or others that it has in development, Munster said.

Add it all up, and you’ve got a business with a highly predictable revenue base and the room for notable — if not super-rapid — growth. That’s pretty much the profile of a consumer-staple company, he said. Investors give those companies healthy multiples not because of their standout growth, but because of the combination of their steady growth and predictability, he said.

Munster thinks it will take Apple much of this next year to steer investors to this new way of thinking about its business. But each quarter it can show the steadiness of its business and results will help reinforce that message, he said. And once investors buy in, Apple’s stock will benefit.

“I think it’s going to have a positive impact,” he said.

[ad_2]

Source link

قالب وردپرس

Technology

A big test of reusable packaging for groceries comes to Canada

Editor

Published

on

By

An online store has launched in Ontario selling groceries and household items from Loblaws in containers it will take back and refill — a test of whether Canadian consumers are ready to change their habits. Industry-watchers say it is breaking ground for reusable packaging.

The store, called Loop, launched in Canada on Feb. 1, in partnership with supermarket giant Loblaws, and offers items like milk, oats, ice cream and toothpaste for delivery in most of Ontario. Loop is already operating in the continental U.S., the U.K and France. 

Included so far are some products from well-known brands such as PC sauces and oils, Häagen-Dazs ice cream, Heinz ketchup, Chipits chocolate chips and Ocean Spray cranberries. 

“The goal is really validating that this is something the Canadian public is interested in,” said Tom Szaky, founder and CEO of Loop and its parent company TerraCycle.

Unlike existing small no-waste retailers, they want to offer “your favourite product at your favourite retailer in a reusable and convenient manner.”

The involvement of a huge retailer makes the launch notable in terms of scale and who it will reach, said Tima Bansal, Canada Research Chair in business sustainability at Western University in London, Ont. 

“I think it’s at the scale that’s needed to create the change in the community in Canada more generally,” she said.

How it works for customers

Szaky likens Loop to the reusable bottle system for beer in Canada “but expanding it to any product that wants to play in the [North American] ecosystem.”

The ultimate goal, he said, is to give people a greener way to consume that limits the amount of mining and farming needed to produce packaging.

“This allows us to greatly reduce the need to extract new materials, which is the biggest drain on our environment.

Loopstore.ca currently lists just 98 products, although many are sold out or “coming soon.” 

As with other online grocery stores, customers fill their virtual shopping cart, but in addition to the cost of the item itself, they pay a deposit for its container. That can range from 50 cents for glass President’s Choice salsa jars like the ones that are normally at the supermarket to $5 for a stainless steel Häagen-Dazs ice cream tub. 

The items are delivered to a customer’s home by courier FedEx for a $25 fee, although the fee is waived for orders over $50.

Once you’ve spooned out all the salsa or ice cream or squeezed out all the toothpaste, the container doesn’t go in the recycling bin. Instead, you toss them into the tote bag they came in — even if they’re dented or damaged — and they get picked up.

Continue Reading

Technology

This wearable device beeps when workers get too close to each other

Editor

Published

on

By

It’s a device that emits a high-pitched beep, buzzes and lights up if your coworker steps too close.

While some introverts would have bought this device before the pandemic to stave off chatty colleagues near the coffee machine, ZeroKey designed the product with a more important purpose — helping employees physically distance to reduce the risk of spreading coronavirus. 

The Calgary tech company’s “Safe Space” device looks like a small plastic badge that can be worn on a wrist or clipped to a shirt pocket or belt. 

“Our products, in a nutshell, localize or figure out where things are in 3D space and our big claim to fame is we do it very precisely, more precisely than anyone else in the world,” said Matt Lowe, co-founder and CEO of ZeroKey.

The company says its location-tracking technology passively monitors the distance between each device and is accurate down to 1.5 millimetres. The distance on devices can be set — so if, say, science determines three metres apart is actually safer that two, that can be tweaked. 

Lowe says the company came from humble beginnings — he and a co-founder, working out of a room in his house. The company has grown from two to 30 employees and has more openings it’s looking to fill.

Inspired by sci-fi

Their inspiration comes, as so many technological innovations have, from sci-fi. 

Lowe recalls watching Minority Report, and being transfixed with the gesture-based user interface Tom Cruise’s character operates. 

“Wouldn’t it be awesome if we had an interface that was more in tune with how humans operate naturally with their hands. So if you could just walk up to a new piece of technology … and just immediately be proficient,” he said. 

But applying that tech to the COVID-19 era wasn’t something the company had anticipated.

Lowe said some of the company’s clients in the manufacturing industry approached ZeroKey with a request.

“They came to us and said, ‘hey … we have the data where people are, can you build some sort of system so that we can do contact tracing and we can let people know if they’re closer than two metres?’ And we said, ‘absolutely … that’s easier than what we normally do,'” he said.

Continue Reading

Technology

Blistering rallies spur Canadian tech world to repeat equity sales

Editor

Published

on

By

Canadian technology companies have been making multiple trips to the equity market over the past year, capitalizing on a rally in tech shares that’s helping them raise cash at ever higher valuations.

Dye & Durham Ltd., which makes software used by law firms, took advantage of a more than sixfold rally in its shares since its July IPO to raise $500 million (US$394 million) in a bought deal of stock and convertible debentures, the company said Tuesday. Dye & Durham, which went public at $7.50 a share, received $50.50 per share in the private placement. Peers including Lightspeed POS Inc. and Docebo Inc. have made similar moves.

Shares of technology companies have gained since the onset of the pandemic as their corporate customers increasingly turned to cloud-based applications to support their remote workforces, said Anurag Rana, an analyst at Bloomberg Intelligence. The technology sector was one of the few places investors could look for growth during the crisis, with huge swaths of the economy including retailers, restaurants, airlines, hotels and casinos hammered by lockdowns, he said.

“Issuers and private-equity investors are not stupid, and they know somewhere down the road that valuations may come back,” Rana said. “So this is the time when they sell.”

Canada’s S&P/TSX Information Technology Index has risen 82 per cent in the past year, fuelled by rallies in Lightspeed and Shopify Inc. That compares with a 36 per cent advance for the U.S. S&P 500 Information Technology Index.

Those gains are giving early investors in tech companies an opportunity to take some profits. In conjunction with Dye & Durham’s private deal announced Tuesday, some investors agreed with the underwriters to sell 1.98 million shares at the $50.50 price as well.

Lightspeed, which provides cloud-based point-of-sale systems for retailers and restaurants, has also seized the moment. The company went public in Canada in February 2019 and last year followed that up with a U.S. IPO, selling shares for US$30.50 apiece. The deal raised US$332.3 million for the company and US$65.4 million for some shareholders.

After Lightspeed’s share price more than doubled, it went back to the market again last week with a public offering of shares for US$70 each, raising US$620.2 million for the company and US$56 million for other shareholders.

Docebo, which sells cloud-based learning software, has tapped the market multiple times over the past year. The firm, which went public in Canada in October 2019, completed a bought deal of shares atC$50 apiece in August. The move raised $25 million for the company and $50 million for investors including founder and Chief Executive Officer Claudio Erba, Chief Revenue Officer Alessio Artuffo and top outside investor Intercap Equity Inc.

Continue Reading

Chat

Trending