Munster lays out five-year Apple model, sees ‘Apple Glasses’ wearable in 2020
Gene #Munster, a longtime analyst at #Piper Jaffray who recently departed to found #Loup Ventures, this week published the venture capital firm’s five year model for Apple.
Munster wrote: “We are publishing our Apple model with forecasts out to 2022 including Apple Glasses, an AR wearable, starting in 2020.
By year end of 2022, we see net revenue of $292B and EPS of $13.20, up from $221B and $8.74 in FY17…
Gross margin stays close to constant as Apple Services’ higher margin offsets declining iPhone hardware gross margin.
The auto opportunity is not in our model.” Among the key takeaways from his report, Munster said he expects iPhone growth to peak in FY19 before “slowly” declining as Apple Glasses emerge, with the iconic mobile phone eventually comprising a “much smaller part” of the company’s business.
How Will Apple Go to Market in Auto?
There are three ways Munster sees Apple potentially bringing its car technology to market. The first option would be to partner with a manufacturer to bring an Apple-branded car to market. The second option would be to focus on developing software and implementing it across as many car platforms as possible. Lastly, but unlikely, the could enter as a fleet service.
Services: Steady, Growing, Profitable.
Munster expects steady growth from Services over the next 5 years. In Mar-17, Services accounted for 13% of revenue and grew at 18% y/y. He believes that in 2022 Services will account for 21% of revenue and grow at 14% y/y. His confidence is supported by the predictability of Services over the past two years, along with the belief that AR apps will be a catalyst for consumer spending on apps over the next 5 years. This segment should remain about 2x more profitable than Apple’s hardware business with a ~60% gross margin, with gains in margin from Services offsetting the loss of margin in hardware.
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