Apple is so big, the company’s influence should be dictating your tech investment strategy, according to Barclays analyst Ben Reitzes, and what Apple doesn’t have, Samsung does. In a research note to clients obtained by The Mac Observer, the analyst outlined a three column investment strategy for investing with companies aligned with either Apple or Samsung, or at least steering clear of companies that aren’t “Apple-safe.”
Barclays is currently forecasting revenues of US$200 billion for Apple by 2013, which, he wrote, defies the “Law of Large Numbers.” This is a reference to the idea that Apple has already grown so large, some have said that the company can not maintain its rate of growth.
Mr. Reitzes’s point is that while that will eventually be true, it’s not true yet, and Apple still has years of growth with just its current product lines.
Samsung is also a giant in the industry, with projected revenues of $196 billion in 2013, just behind Apple. That includes the sale of some 446 million handsets, including both feature phones and smartphones.
Especially with Apple
“Let’s put the Apple figures alone in perspective,” Mr. Reitzes wrote. “Apple just reported revenues of more than $46 billion in C4Q11. Within three years, it is plausible that Apple could have an $80 billion revenue quarter.”
That’s a lot of money, but as in all things, context is king. To wit:
“This type of revenue in one quarter is about the size of both the enterprise server and storage market combined – for an entire year.”
Long time Apple observers will clearly remember days in which it was lamented frequently and loudly that Apple didn’t play well in Enterprise, and that the company wasn’t competitive in that market. While that has been changing with iPhone and iPad, Mr. Reitzes points out that Apple could see more revenue in a single quarter than the entire Enterprise server and storage markets bring in all year.
Furthermore, Barclays believes that Apple’s Americas division alone could have sales $56.6 billion, a number that represents about 40 percent of the estimated consumer electronics sales in the U.S. That’s a bit of an apples-to-oranges comparison, but it does serve to put Apple’s growth in perspective.
With all that talk talk of Apple’s massive size, Barclays is telling clients that they need to take Apple into consideration when investing in tech. On the one hand, there’s the idea of investing in companies that are in some way aligned with Apple, either through its supply chain or as partners. On the other, investors need to be wary of companies ripe for Apple disruption. The third option is to pay attention to companies aligned with Samsung.
“Our point is simple: Apple’s share of tech revenue and profits, when combined with Samsung’s, is so large globally that those who are allied with them can still win – and those that are not (either in the supply chain or because of a technology disruption like printing) could face some serious challenges,” the analyst wrote.
He added, “We do not believe that consumers or corporations will see spending capabilities expand enough over the next five years to allow categories like PCs and printers, for example, to grow significantly. The share of wallet for smart mobility is too high to allow other categories to grow at historical rates (consider that smartphones are subsidized, but come with higher monthly fees that total more than $1,000 per year for many users).”
Below is Barclays’s first column, companies with “Overweight” ratings that are aligned with Apple.
Next we have Barclays’s second column of companies with an “Overweight” rating that are aligned with Samsung.
The third column is even more interesting to us, mostly because it includes a few names that were, once upon a time, considered Apple’s nemeses. These companies are all rated “Underweight,” and are named as companies that are “challenged by Apple and Samsung.”
“Given the rise of Apple and its share of market cap and industry profits, it is important to also invest in what we call ‘Apple-safe’ companies,” Mr. Reitzes wrote. “This third column of tech includes cloud and Big Data themes and other enterprise-related tech trends that Apple cannot really disrupt. However, we don’t include enterprise PCs, which we believe are disrupted by the consumerization of IT, where Apple leads.”
Today’s note was released after the closing bell.
Shares in Apple gave up some of Monday’s gains, ending the day at $556.97, down $4.31 (-0.77 percent), on strong volume of 24.8 million shares trading hands.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.