Competition Only Helps Apple Ripen, An Advantage Over The FANG Stocks

Based on views from Apple Inc. AAPL observer Horace Dediu, UBS said in a note competition only helps, which gives it an edge over the FANG stocks, namely Facebook Inc FB, Netflix, Inc. NFLX, Amazon.com, Inc. AMZN and Alphabet Inc GOOGL.

3 Competencies

Analyst Steven Milunovich highlighted Apple's three competencies, namely its ability to be either integrated or modular as circumstances require, a relentless focus on the job to be done and being in a constant state of high competition, which serves to keep attention on the product. These competencies, according to the analyst, help it to develop a greater ability to compete and adapt despite facing more competitive threats than the FANG group.

Antifragility & Monopoly – Apple's Narrative

UBS referred to the two concepts regarding Apple's narrative, namely antifragility and monopoly, as identified by Dediu. Antifragility refers to things that benefit from volatility and change. Dediu feels Apple's position is less fragile than its first appears, with increased emphasis on services and installed base.

Pricing Power Confirms Monopoly

According to Dediu, Apple exhibits superior pricing power. UBS also noted that Warren Buffett is convinced Apple has a moat similar to The Coca-Cola Co KO and Wells Fargo & Co WFC. Taking a jibe at the Doubting Thomas among the press over Apple's leadership, Dediu clarified that one characteristic of monopolies is pricing power.

While Apple's iPhone ASP of about $700 in its calendar year fourth quarter has rebounded to an all-time high, Dediu noted that Google's cost per click has been declining. Dediu sees the possibility of iPhone ASP going higher with the iPhone 8. Apple enjoys 90 percent of smartphone industry profits, Dediu noted.

UBS rates Apple a Buy, with a 12-month price target of $151.

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