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Comment by MicroBerto | Hacker News Reader

I'm just here to set in stone and state for the record that I believe this will be a losing play. My reasons are here:

Rationale here from a comment over 3 months ago:

https://news.ycombinator.com/item?id=11035168

> last time I was on an airplane (December), every single older woman over the age of 60 had an iPhone. This means that it's not only reached critical mass (the late majority on the technology adoption curve has been achieved), but now it's no longer hip.

> I'm not sure what will be next, but I'm guessing it won't be Apple's.

> Were I gambling man, I'd have shorted Apple's stock right there after that airplane ride.

So when I'm wrong, y'all can roast me proper.

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Apple is already priced as a low-growth stock (P/E around 10). So if they never do anything more than leverage the brand loyalty of iPhone customers, they'll still fulfill the expectations of their price.

An adoption curve leveling off is a normal thing in business; money can still be made. When did the adoption curves for insurance, paint, homes, jewelry, soft drinks, etc. level off? Long before Berkshire Hathaway came along, but they have done pretty well in all of those of markets.

I think BH has a good chance of getting a return.

I didn't realize the P/E was so low. Sounds like a bargain.

Edit: They're paying a modest dividend as well. AAPL is becoming more of a mature stock, but that's not a bad thing.

Apple's P/E has always been low compared to its peers. Even when the iPhone and iPad growth were both very high, I think it has always had a < 20 P/E.

If you discount cash, it's actually around 6

This has zero to do with the value proposition of the stock. AAPLs P/E is below 10 at this point. They have about 1/3rd their value in cash alone, which means their actual P/E is even lower. It doesn't matter if grandmas are using Apple products, they are a seriously good-value stock.

This is the top comment in this thread at the time of this writing, and it's armchair opinionitis at its best. Put your money where your mouth is if you truly believe what you are saying. Until then your "setting in stone and stating for the record" is completely meaningless.

For one thing you haven't considered that this might be priced into their P/E ratio, unlike most other growth tech companies. If you were a "gambling man" this would be part of the equation in deciding if they are over- or undervalued.

Why does an older person using something mean that a younger person wouldn't want to?

There's no Android device on earth that's nearly as hip as the iPhone. Regardless of how many old people are on iOS.

This happened with Cadillac and they've been spending a lot of money to appeal to a younger demo.

No, it didn't. Cadillac didn't suddenly become unappealing to young people just because old people like them.

They became unappealing because they were simply unappealing to young people and there were more appealing options for young people.

Android has yet to produce anything that even remotely resembles a more appealing option to these demographics. Apple is an expert in "hip." If you have an Android and your friend has an iPhone, you know that your messages are showing up green whereas everyone else's are showing up blue. This lack of totally 100% superficial conformity alone means that Android has a monstrous hill to climb with younger people, e.g. the people who care most deeply about acceptance amongst peers.

Yes - branding drives perception which can drive consumer decisions. Consumers can also drive a brand.

Certainly skewing old wasn't the only factor for Cadillac but it definitely was a component and they are trying to spend their way out of that image (both with ads and with more performance-minded cars).

I agree that Apple is an expert at hip but their time dominating is limited. It gets harder to be hip when so many people, especially those much older have them and mom/dad/grandma/grandpa all want to Facetime you. Younger people have been migrating their time away from Facebook because of the saturation.

I disagree on Android and the data doesn't back up your statements. Android is comparable with younger demos [3] and has more market share [1] (esp. outside the US) [2] so they don't "have a monstrous hill" to climb with younger people. Android and device manufacturers are positioned quite well.

It's going to be a challenge for Apple to continue to ask for a premium price when they no longer have a compelling quality argument and Android OS and devices keep getting better with many outperforming the iPhone. People are also getting tired of Apple's closed systems. They are "The Man" but most consumers haven't realized it yet. The squeezing they do with storage is ridiculous.

[1] 52.8% market share in the US, Jan 2016 - https://www.comscore.com/Insights/Rankings/comScore-Reports-...

[2] 80.7% market share globally, 4Q2015 - http://www.gartner.com/newsroom/id/3215217

[3] 52% of millenials have an Android device vs 44% for iPhone, 2014 - http://www.techtimes.com/articles/15084/20140908/draft-andro...

> Younger people have been migrating their time away from Facebook because of the saturation.

Therefore Apple is becoming uncool? Kids are moving away from Facebook not because old people are using it and that makes it uncool. It's because old people are using it and that means old people are watching them with it. Facebook is also just getting worse and worse as a product, while things like Snapchat are getting better and don't have parents/employers looking over your shoulder.

Re: Android, these are the same arguments we've seen since Android first started getting market share, yet Apple is still chugging along just fine. Market share is only one part of the story, and it's so far from an accurate indicator of "in" factor (exclusive things are often "in") OR of product health/profitability.

"People" are getting tired of closed systems? Which people? FOSS advocates? Hackers and tinkerers? Thank god there are 100x more people with equivalent checkbooks and less idealism when it comes to which devices they purchase.

That's really an issue with most luxury car brands, they become associated with old people because that group can more readily afford them. A $600 phone is attainable by most age groups, so I really don't see the same thing happening.

It's more Cadillac became seen as an old person's car. That hasn't happened to the iPhone.

It hasn't happened yet, perhaps, but the demographic information I've seen (which, admittedly, is from 2013 and may have changed) shows the iPhone-to-Android ratio monotonically increasing with age, which certainly suggests a risk for that:

http://www.marketingprofs.com/charts/2013/10957/how-iphone-a...

Keep in mind, too, that parents may not want to spend very much on a cell phone for a kid who's likely to drop it, lose it, etc. It may just be that the higher price makes it less likely a younger person will have one.

That data and others I've seen doesn't include < 18. In my experience I've only seen kids with iPhones, often the previous generation from their parents.

iOS seems to have better kids content and iPads and iPhones are quite durable from drop with protection.

I think it was far more complicated than that.

Cadillac was a luxury brand that completely lost the plot, in terms of quality, service and importantly: brand.

As a result, luxury customers went elsewhere almost entirely (hello German sedans) and it stopped being an aspirational brand.

With younger buyers mostly not interested, most of success was selling to older customers for whom the brand still had left over positive associations, plus some die hard "no foreign cars" types. But this just made the brand problem worse, cementing the "old person car" brand.

So yes, they're fighting it now (without much success). But the real problem was that they started to peddle bad cars, and competitors ate their lunch. This in no way resembles the current situation with iPhone.

Be careful thinking Apple will keep sellng iphones and ipads. Their expertise and their cash can probably be thrown into a lot of industries with disruptive success (car industry, pharma, space exploration, etc.). Even the name, Apple, does not bind the company to any specific line of product. I think what the investors are betting here is the ability of Apple of coming up with something as big as the ipod-ipad saga in the coming years. I can see risk in this assumption, but I don't believe is 100% going to turn out badly, so far I'd distribute probabilities equally and do a 50/50 that Apple gives the investors 10x in the next 10 years.

You truely beleive that a company with almost the largest market capitization of any company has a large chance of increasing it by 10x?

This - and the fact that branching out of phones/tablets/computes into cars or space exploration would be a pretty big jump industry wise. Everything they've built to-date has been an extension of either desktop and portable computing or Internet/networking/web technology. The one exception to this is their Music/Book/Movie business, but from my understanding those not only pale in comparison to their "physical" device sales, they are only done out of necessity to supply said devices.

in 1993 Exxon was the world's most valuable company with a market cap of roughly $80B. they didn't reappear as the most valuable company again until 2007 with a valuation of roughly $500B. yeah, big swings are still possible even in very established markets.

How do these numbers look closer if you correct for inflation.

$80B in 1993 are equivalent to $114.79B in 2007.

The way I see it, Apple either grows exponentially or linearly and I give those outcomes a 50/50.

By the way, a company doesn't need to do 10x the stock price to deliver 10x to investors. They can pay dividends. They can sell divisions.

We have been enjoying exponential growth for a while now:

https://ourworldindata.org/wp-content/uploads/2013/11/long-t...

Um, explain to me how their expertise could be thrown into pharma?

It can't. Their expertise is in consumer goods and marketing in particular. They don't have the data expertise, medical expertise, or really any relevant experience for pharma.

Maybe not drugs but I wouldn't bet against them on medical devices.

What phone is "hip"? Phones might have reached the point where there isn't going to be another big paradigm shift anytime soon that changes the ways phones are used like the iPhone changed things.

So Apple (and Samsung, etc.) may have exhausted a lot of the growth opportunities in the mobile market, but there are still other markets for them. Apple didn't even have a phone product 10 years ago, so it's hard to say what their future endeavors will be.

Betting on Apple doesn't mean betting solely on the iPhone.

Why can't they slog along with compressed margins for the next 20 years? There are hundreds of viable companies in the S&P 500 that have fully realized their user base, but are perfectly good investments. I feel like SV types get too hung up on growth, and fail to see that producing consistently high profit is still a great way to make money.

Those seem like valid suppositions, but I do think you're missing a big variable.

(I think) you only take into account the US Market but the emerging world is late to the party and should represent a big piece of the pie. It hasn't reached majority tech adoption nor is it no longer hip.

That said, I also think its a loosing move because of the downwards trend in AAPL stock- bit that's only layman's conjecture. I guess it depends for how long they want to hold it.

Buffett and his managers aren't concerned about the stock price "trend," they're looking at the stock price in relation to the intrinsic value of the equity. With that said, I'd bet Todd Combs made the investment and he does trade more frequently than Buffett and Ted Weschler.

This all assumes that Apple, who has a solid history of product category pivots, has no plans, ambitions, or interest in entering new markets. Remember how saturated iPods became? Remember when it seemed they were running out of colors and ideas for new music players? The answer was iPhone.

I think it hasn't yet reached critical mass yet in plenty of second world countries. In Romania for instance there are plenty of lower end phones (specially /w teenagers) not because it's not hip (on the contrary, it yields social status) but because compared to the average wage here it's expensive as hell. The iPhone SE will probably sell heavily around here.

EDIT

An US (correct me if I'm wrong) airport might not actually give an accurate picture of the market since the lower class doesn't fly planes that often.

I dont undertand, why reaching the critical mass would make the business fail ? It's not all about growth

It wouldn't make them fail but as an investment the growth could be priced in which is bad if they miss targets.

Apple is a 10 P/E, FYI. And their earnings are GAAP, unlike their "growing" peers.

At my church I play in a music group with mostly high school students. Virtually all of them have iPhones. So it's not a good indicator.

Your experience may not be representative of the general market.

http://www.marketingprofs.com/charts/2013/10957/how-iphone-a...

Do you not get out much? Old people been using iPhones since forever.

The efficient market hypothesis would like a word with you.

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