Apple iPhone Sales Are a 'Little Light': D.A. Davidson's Luria

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Transcript

00:00I know you've been relatively comfortable here with the way that this company has been managed.

00:04When you look at the sales numbers, particularly on the product side, you look at the revenue on

00:08the services side, Gil, does that match up with valuation and the rise that we've seen in the

00:12stock over the past three months? Not quite. And in fact, that iPhone number is a little light.

00:19I think that we were expecting closer to 50. And the stock, which has had a nice run up in the last

00:26few weeks, really had embedded in it an expectation for a big upgrade cycle. So being a little less

00:33than that doesn't necessarily bode well for the fourth quarter in terms of iPhone sales. So I

00:39think that's why you're seeing a little bit of pullback in the shares. And let's not forget Apple

00:43is still a darling. Apple trades at the highest multiple of the Mag 6 in spite of the fact that

00:51even with a good iPhone cycle, it's going to have the slowest growth of the group. And that's

00:57because people love the product, love the company, love the stock for historical reasons. But that's

01:03being challenged by the fact that, again, they grow the slowest of their peer group, and yet they

01:08traded the highest earnings multiple. This gets to this idea, though, too. I mean, we've always

01:12talked about just how sticky and powerful this Apple ecosystem is, iPhone ecosystem, at least we should

01:18say here. What sort of breaks them out of that? And I mean, where they take that ecosystem and leverage

01:24it to something better? And I mean, I guess, to a certain extent, more dynamic, for lack of a better

01:29phrase? Well, I think as you were discussing with that earlier, part of the conversation here is how

01:35do they leverage how sticky their ecosystem is, how much they know about us, how integral they are into

01:42our lives, into introducing AI products that can drive an additional leg of growth and can drive a

01:49bigger iPhone upgrade cycle? That's what we're waiting on. And that's OK for Apple. They've never

01:55wanted to be first to something. They never need to be fast. They just want to get it right. And so

02:02they're being deliberate about introducing these AI capabilities. But ultimately, that's the only

02:07potential for incremental growth above and beyond where we are now. Because behind that, we need a

02:15new form factor. We need glasses. We need goggles. We need a new form factor to drive another leg of

02:21growth. And that looks to be farther out. At best, we're going to get a folding phone next year.

02:27I'm not sure how close we are to another iteration of Vision Pro or glasses that look like Meta Ray-Bans.