00:06 Speaker A

Right, Apple shares erasing losses for 2025. Last week the tech giant turning green for the year in the days following the release of its newest products including the new iPhone 17. For a closer look at the Apple story right now, let’s get to the senior media and Internet analyst Laura Martin. Laura, let’s just start uh with your reaction to uh what we saw from Apple a couple weeks ago now, their new product lineup. Um and I I think I think we agree on kind of how I felt coming out of that presentation.

01:00 Laura Martin

Yeah, very um, very lukewarm, no innovation. I think they’re under pricing pressure, which is why you saw them raise no price except for the Pro. One of their models went up by $100 because they introduced a new tier. But really they’re under pricing pressure and they’ve elongated because there’s no reason to buy a new iPhone. Um, the only reason people are buying a new iPhone is because their iPhone is now seven years old or six years old and they want, you know, they just need to get a new iPhone or leave the ecosystem. So all of that is elongating replacement values and lowering the potential earnings of Apple.

02:00 Speaker A

And I’m curious, you know, how you’ve thought about um the lack of an AI story, let’s say around Apple and how much that to you matters around the story, um or is this kind of like elongated, less exciting hardware replacement story just going to be very difficult to overcome, you know, no matter what your AI strategy ends up being.

02:37 Laura Martin

Right. So, I mean, I think I think the problem is that their biggest competitor is Android, which is owned by Google, which as you know is integrating its LLM called Gemini into every product it has including of course Android. So while Apple has an outstanding defensive moat around its installed base, the fact that they can’t raise price anymore, that that people aren’t replacing their iPhones. It used to be every four years. Now it’s like six and seven years. All of that makes it scarier because if Android rushes ahead, there will be a breaking point at which, a year from now, three years from now, people will start leaving the iPhone ecosystem because Apple is falling further and further behind from their primary competitor, which is Android.

03:52 Speaker A

Now, uh you’re hold rated on the stock. I’m curious when you’re meeting um with clients, with investors, like is this a stock that one, either people buy and they’re just kind of wishing it to go higher, or two, is it a name that like people want to overweight, but they just can’t get there? Like what’s the what’s the reaction, um the the sentiment I guess in those conversations around the Apple story today?

04:24 Laura Martin

Right. So I would say the two primary holding groups of Apple today are A, defensive, meaning some people think that generative AI is really overhyped. And if you think generative AI and the returns on capital for all the investment other companies are doing on generative AI, then Apple is exactly the right place to hide because they’re spending $12 billion this year on CAPEX, while Amazon and Google and meta are spending 85 billion to 100 billion this year on generative AI with absolutely no incremental revenue that’s identifiable, linked to that spending. So if you don’t believe in generative AI and the future of retooling the American economy, then Apple is a big reason to own that because they have free cash flow, they’re shrinking their share base with their free cash flow, they’re deleveraging. So, um, I would say that’s one group of Apple holders. And then the Apple is heavily retail owned and I think the other uh reason is the ecosystem that people cannot imagine trading in their iPhone ecosystem for an Android and that then they take that anecdotal feeling about they have and they just stay in Apple because it really does have a very powerful ecosystem.