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The Future Of Retail Is 'SIMPL': What It Means And Why It Matters For Apple Investors

The Future Of Retail Is 'SIMPL': What It Means And Why It Matters For Apple Investors
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The competitive landscape in retail will continue changing and the ultimate victors will be those that excel in being "SIMPL," according to D.A. Davidson. 

The Analyst

Analyst Tom White initiated coverage of Apple Inc. (NASDAQ: AAPL) with a Buy rating and 12-18 month price target of $220.

The Thesis

"SIMPL" refers to social networking, international expansion, mobile, payments and logistics, Forte said in the initiation note. Apple's expertise in these themes in its retail operation is a positive signal for Cupertino's sales and margin outlook, the analyst said.

Social Networking

Apple's "unbelievably powerful brand" ranked first in Interbrand's 2017 list of top global brands, White said. The company's ability to leverage its brand across social networks to market and increase adoption rates could serve as a sales catalyst, he said. 


Apple could expand its international sales above today's numbers, the analyst said. Over the next decade, emerging markets led by China should expand at a "materially higher" rate than other mature markets like Germany, Japan and the U.K., according to D.A. Davidson. 


Apple deserves major credit for the emergence of mobile as a significant trend in the retail environment, White said. Of the "SIMPL" categories, mobile represents Apple's best chance of driving incremental revenue growth from increased conversion rates for purchases, the analyst said. 


Apple Pay was introduced to the market in 2014 and makes it easy for consumers to complete a purchase from their mobile devices in stores, White said. This factor is becoming "incredibly important," since mobile conversion rates are one of the most notable challenges in retail today, he said. 


Giving consumers the ability to buy what they want is meaningless unless the product can also be purchased when and how the consumer wants, White said. Apple's ability to offer consumers one- or two-day shipping — and in certain cases a two-hour delivery option through a courier service — is overshadowed by the company's revenue rate of $220 billion, which is too large to be noticeably impacted through logistic efforts, the analyst said. 

Price Action

Apple shares were up 1.76 percent at the time of publication late Tuesday afternoon. 

Related Links:

What To Expect From Apple's Q2 Earnings

Bernstein's Sacconaghi Cuts Apple Estimates On Projections Of Weaker iPhone Sales

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Dec 2018Morgan StanleyMaintainsOverweightOverweight
Dec 2018RosenblattMaintainsNeutral
Dec 2018HSBCDowngradesBuyHold

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