Neil Cybart 10/29/24 Neil Cybart 10/29/24

A Different Kind of Apple Product Unveiling, The Updated iMac, Apple’s Mac Pitch to Windows Users

Hello everyone.

This is shaping up to be a busy week. On Monday, Apple unveiled an updated iMac. As we will discuss shortly, Apple has pointed to more Mac news coming down the pipeline this week. We also have Apple Intelligence launching on Monday.

On Thursday (Halloween), Apple reports FY4Q24 earnings.

Today’s update will focus on the updated iMac. The tentative plan will be to begin talking about Apple’s earnings tomorrow with that discussion rolling into Wednesday.

Let’s jump in.

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Neil Cybart 8/7/24 Neil Cybart 8/7/24

Apple’s 3Q24 in Three Charts

Hello everyone.

While recording the podcast episode for yesterday’s update, it occurred to me that one part of our discussion could have benefited from a bit more explanation. While such explanation was added to the podcast, which does routinely happen when episodes are recorded, to ensure everyone received the explanation, the following passage was from yesterday’s update:

“Back in 2019, [Warren] Buffett trimmed a very small part of Berkshire’s Apple stake. When asked why, Buffett didn’t actually provide an answer other than to say Berkshire’s overall stake in Apple continues to move higher due to Apple's buyback program.”

Since Apple is retiring the shares that it repurchases, the overall number of shares outstanding has been declining. This means that each remaining outstanding share is entitled to a larger share of Apple’s future cash flow (and business). If Berkshire didn’t buy or sell any additional AAPL shares, their stake in Apple would gradually rise thanks to Apple’s buyback program.

If we assume that Buffett cuts Berkshire's AAPL stake so that it’s slightly larger than the next largest equity holding (say $30B fair value at 140M shares), that would equate to 0.9% of Apple. Over time, assuming Apple continues to buy back shares and Berkshire doesn’t sell any more shares, that Apple ownership percentage will rise. The buyback is a major reason why Buffett finds AAPL shares attractive.

We will continue our Apple 3Q24 earnings review. Let's jump in.

Apple’s 3Q24 in Three Charts

Last Friday, we went over how Apple’s 3Q24 earnings compared to my expectations. Results came in close to my estimates. Nearly every line item beat (HW gross margin was the only thing that missed).

We also discussed the largest takeaway from earnings: iPhone fundamentals continue to gradually improve and are becoming less of a drag on Apple's overall ecosystem growth.

Turning our attention to secondary themes from earnings, there were three:

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Neil Cybart 3/27/24 Neil Cybart 3/27/24

Walmart Begins Selling $699 M1 MacBook Air, Apple Becomes Aggressive with MacBook Air, Revisiting Mac Sales

Hello everyone. Today’s update will be dedicated to Walmart beginning to sell the Mac for the first time. The announcement is tied to Apple running with new entry-level pricing for the MacBook Air. There are a few angles to the news worth discussing.

Let’s jump right in.

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Neil Cybart 11/22/23 Neil Cybart 11/22/23

The State of the Mac (Above Avalon Report)

An examination of Apple’s oldest product category.

Written by Neil Cybart - November 21st, 2023

Three years into the Mac’s Apple Silicon transition, the product category has never been stronger. It’s a stark difference from where the Mac was a decade ago. And yet, Mac sales are back to the same level as they were pre-Apple Silicon. This report reflects on where the Mac has come from and where it is going as Apple heads into spatial computing.

The Mac’s Past

The 2010s represented a complicated decade for the Mac. While Apple never lost its optimistic and upbeat tone with the Mac, the product category experienced a few highs but also the lowest of lows.

The best way of describing Apple’s old approach with the Mac (pre-2017) was aggressiveness in getting users to shift to mobile devices. (For this Report, we won’t go over Mac strategy pre-iPhone).

Apple was seeing unprecedented demand for iPhone and iPad with strong installed base growth. Even though Apple was continuing to add new users to the Mac installed base, the rates were not at the same level as what was unfolding with its mobile siblings.

In the early and mid 2010s, a going theory on display with Apple’s product development strategy was that many Mac users would eventually migrate to iPad (and iPhone). These Mac users were not developers and had no need for pro Mac software. Instead, they were sticking with the Mac for other reasons, including familiarity. Based on subsequent Apple disclosure, parts of that theory proved correct. In early 2017, Apple said 70% to 85% of Mac users weren’t relying on professional Mac software. This group was thought to be a prime target market for the iPad.

The implications of this Mac mindset went far. As workflows migrated from the Mac to iPad, the Mac line would be winnowed down to essentially three models: the MacBook, iMac, and Mac Pro. At least, that was the theory. Although this goal wasn’t directly telegraphed in ad campaigns or commercials, Apple’s actions with the Mac spoke volumes. The Mac mini went years without an update. The now infamous butterfly keyboard debacle was ultimately Apple trying to make MacBooks as thin as possible (keys stability was positioned as another selling point). Other new ideas included the Touch Bar and the 12-inch MacBook form factor. The takeaway wasn’t that Apple gave up with the Mac or was losing interest (far from it). Some of the Mac features were clearly inspired by the success seen with Apple's mobile devices. Instead, Apple appeared to be struggling with understanding what users, especially those with pro workflows, were looking for in a Mac.

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