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Munster Talks Apple's 'One More Thing,' Product Cannibalization, Future In Services

Munster Talks Apple's 'One More Thing,' Product Cannibalization, Future In Services

Who’s ready to shell out $999 for the iPhone X?

About 20 percent of future Apple Inc. (NASDAQ: AAPL) segment buyers, according to Loup Ventures managing partner Gene Munster.

“This is a really important product,” Munster said Thursday on Benzinga’s PreMarket Prep radio show. “It’s going to have a measurable impact on the business, but it’s not going to have the same impact as the model 6 a few years ago.”

On a scale of demand, if the iPhone 6 was a “10,” he considers iPhone X an “8” ━ a meaningful rating against the “5”-worthy hardware of the last three years.

Apple Sibling Rivalries

Still, the product is not expected to outsell its less expensive and concurrently released counterpart. The iPhone 8 is predicted to capture 26 percent of Apple’s segment sales.

At the same time, some are concerned that the X will cede sales to Apple’s LTE-connected Watch Series 3. But Munster considers the new wearable complementary rather than cannibalistic.

“Think of this [watch] as an iPhone for really wealthy people for the weekend,” he said. “You’ll still have an iPhone. Even though you don’t need an iPhone with you for this watch, you still need an iPhone to set up the watch.”

Related Link: The Reviews Are In: Apple Needed To Go Bolder, Better With New Lineup Of iPhones

Not All About Hardware

Despite Apple’s ostensible emphasis on hardware, Munster maintains that the firm’s future lies in services, whose contributions to total revenue are projected to grow from 12 percent to 20 percent by 2020.

“Investors should pay more for this services’ revenue because it’s more predictable,” he said.

In fact, he sees the iPhone falling from two-thirds of Apple’s business to less than one third in 10 years, replaced largely by AR-optimizing wearables controlled by voice, gesture or thought.

“I know that all sounds crazy futuristic, but that’s at the core of what Apple’s trying to do, to slowly lay the groundwork for that,” he said. “Compare that to what [Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)’s] Google did a few years ago when it came out with Glass, and it kind of surprised the market and didn’t have as much utility. That didn’t work, but I think Apple’s measured approach over the next decade will yield positive results.”

PreMarket Prep is a daily trading show that airs every morning from 8–9 a.m. ET here and on our YouTube Channel. You can also listen to the podcast on iTunes, SoundCloud and Stitcher.

Latest Ratings for AAPL

Jan 2021Cowen & Co.MaintainsOutperform
Jan 2021Morgan StanleyMaintainsOverweight
Jan 2021BarclaysMaintainsEqual-Weight

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