Current Price: $262.82
Market Capitalization: $3.90T

Apple Inc. better remain Steve Jobs’ company – a reflection of his meticulous desire for better creativity, seamless product integration, an obsession with talented individuals, and the best user experience in each era. That legacy is what Apple’s strategy team attempts to preserve today. Unlike competitors who are tied to key third-party products or heavily invested in the artificial intelligence ecosystem, Apple has built a vertically integrated supply chain empire (Tim Cook’s legacy). Apple designs its own chips and the transition to in-house silicon was pivotal. Apple is now fully independent from Nvidia and Intel, unlike other key competitors. This unique position allows for their hardware and software to evolve tangential. As competitors rush to dominate the artificial intelligence arena, Apple’s approach is more deliberate – focused on personal intelligence. Apple plans to embed machine learning more subtly into their customers daily life – enhancing privacy, performance, and productivity within its ecosystem of products. Apple is banking on the concept of – it isn’t about being first – it is about being accurate and excellent with what they bring to market, a legacy Steve Jobs has instilled in the organization.

From a creative technology perspective, it is my personal view that Apple’s technology should become and evolve to be the quiet yet dominant maker of the modern home ecosystem – which already overlaps with their current products and values – security, music, health, and intellectual development. The real power of Apple lies in how their products work together. Each product has a deliberate purpose and can seamlessly co-exist with their other products. Apple’s main ecosystem consists of: iPhone, iWatch, iMac or Macbook, iPad, and AppleTV. This interconnectedness is a deliberate strategy that enhances the consumers everyday life.

If the ideal frontier for Apple is the home itself – they will continue to deepen their dominance in the home environment as its lasting strategic moat. Products like an actual Apple TV, iHomePod, iSecurity systems, iDoors, and advanced software that interconnects to appliances or vehicle dashboard software. Imagine a world where your vehicle starts at 7:20am every morning – the garage door opens – and the car automatically reverses and parks. It waits for the owner to jump in the car and go to work. This although excessive and not available today – I do believe will be a realistic experience in our lifetime.

It is rumoured that Apple is in active discussion with Warner Bros. Discovery about a potential acquisition centered on Warner’s expansive creative content library. Such move would very much suggest an Apple TV is undoubtedly in the design phase as the newest product in their future. This move suggests that Apple is desiring to scale its entertainment beyond niche markets. Apple could instantantaniously improve its Apple TV plus boutique subscription service to a powerhouse capable of rivaling Netflix, Disney and Amazon simultaneously deepening its home experience. The Apple TV, a hardware that would unify the company’s design philosophy is a strategic play toward owning not just the screen, but everything that plays on it.

I must personally admit – I have been an Apple advocate for years. The companies exceptional product design and seamless ecosystem have long set the industry standard. However, competitors such as Google and Microsoft have made significant strides in improving hardware innovation – effectively eliminating Apple’s strategic edge in design and material quality. Now that the artificial intelligence frontier has emerged and Apple was slow to act – they have undoubtedly exposed themselves to significant risk to the longevity and brand loyalty of the company.

Competitors such as Google and Microsoft hold a clear advantage in software sophistication and artificial intelligence capabilities – an advantage that, if it continues, will force Apple into an uncomfortable position of dependence on external technologies to sustain its ecosystem.

This won’t be my last piece on Apple. I plan to explore related topics and the broader implications of technologies evolution. My investment recommendation is not based on creative performance or brand loyalty, but on current market economics – and now, these fundamentals suggest a company hopefully not yet at its peak.

As it is said in the iconic track “White Flag” by Dido

“I will go down with this ship, and I won’t put my hands up to surrender…”, this lyric captures my sentiment of many long-time Apple advocates, as their brand position is at risk of drifting in uncertain waters.

Recommendation:

Buy Long AAPL, as they are currently UNDERVALUED.