Can Apple Transition From Dependence Upon 'Hit' Products To A Sustained-Growth Focus?

UBS's Steven Milunovich hosted a chat with two notable Apple Inc. AAPL experts, Horace Dediu of Asymco and Neil Cybart of AboveAvalon.com last week to talk about iPhone expectations and the longer-term opportunity in transportation.

In a new research report on Monday, the analyst held another chat with the two Apple experts but this time the conversation focused on Apple's image, M&A strategy, China and what's next for the $800 billion company.

What Is Apple?

According to Cybart, Apple hasn't benefited from a "successful Wall Street narrative" over the past few years as the company is too focused on unit sales. This is, however, changing as Apple's image is evolving from a tech or consumer company to a design company where "design refers to how the product is used."

Cybart and Dediu both agree on the importance of Apple maintained a brand and customer experience and satisfaction is of "paramount importance." But new products won't be given the benefit of the doubt in consumers' minds (like the Watch and AirPods) and could take years to gain traction.

In the meantime, Apple needs to "milk the iPhone before the next wave of new products is required." Expanding on the iPhone, both experts see a successful iPhone 8 sales cycle and a recovery in China.

Apple As An Innovator, Not An M&A Buyer

Dediu argued that Apple isn't an "inventor," rather it is an "innovator" — entering new markets at a time when it is accelerating.

Neither expert sees Apple overseeing large-scale M&A deals as the company is known to take large risks but very few. Apple also prefers to be capital intensive on its own business, unlike many other tech vendors.

Milunovich rates Apple's stock with a Buy rating and $165 price target.

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