Apple Revolution (NASDAQ:AAPL)
In economics, “disintermediation” refers to “the removal of intermediaries in the supply chain.”
Today, Apple (NASDAQ:AAPL) released their quarterly earnings numbers, absolutely blowing away Wall Street estimates. The company
reported EPS of $3.33 compared to consensus estimates of $2.45. In the year ago period, the company reported EPS of just $1.33. The growth is staggering.
The company also beat Wall Street revenue estimates by about $1.5 billion and raised their forward looking guidance.
What is driving this unbelievable performance, and what catalysts will drive the share price significantly higher in the coming years?
I believe that Apple is pursuing a strategy of “disintermediation,” which they are executing flawlessly. The company has situated itself at the nexus of a vast array of cutting edge businesses, from music distribution to gaming, to the new world of Apps. This should lead to continued growth, margin expansion and more revolutionary product releases in the coming years.
Apple’s lineup of products has put the company at the forefront of content delivery in the world of mobile web and new media. Furthermore, the company has developed a vast and loyal following of global consumers who pledge their allegiance to the Apple brand with a constant flow of dollars.
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This allows Apple to continue to generate incredible sales on products which seemingly are getting long in the tooth – such as the iPod. A material slowdown is simply not materializing, however, as iPod sales fell a mere 1% to 10.89 million, compared to last year’s quarter.
I believe that this is due to the iconic brand and loyal following that Apple has developed in the consciousness of consumers. People who already own one or two previous versions of iPod, are more than willing to go out and spend another $250 on an iPod touch. And this phenomenon can be seen across Apple’s product line.
The success of these innovative products – Mac, iPod, iPhone, iPad – have allowed Apple to seize control, or significant influence over, a vast array of content and steal revenue from its competitors. In a word, disintermediation.
Music, books, mobile browsing, streaming movies, Games, Apps – Apple’s products are many consumers’ preferred methods of delivering all of this content. And Apple is generating incredible revenue not only from the sale of the devices themselves, but from periphery businesses such as the App Store, iTunes, and iBooks among a myriad of other diversified revenue streams.
For many people, Apple has become their portal into the world of screens and all of the content that they access on a daily basis.
Whether it be checking their Facebook page from an iPhone, watching a movie on a MacBook, or reading the New York Times on an iPad, these experiences resonate with consumers and create deep brand loyalty. The result – huge profits for Apple.
Bud Fox
Benzinga
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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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