Some things never change

Friday, Apr 23rd 2021


Earlier this week, Apple held its spring product launch event, which saw the introduction of a colorful new range of Macs, M1-chip powered iPad Pros, and AirTags - Apple's debut location tracking device.

We believe AirTags could be a breakthrough launch for Apple as it kickstarts Apple's reach into low average selling price (ASP) accessories, enables mass adoption of a myriad of under-addressed use cases at scale, and perhaps most importantly, reinforces the value of Apple's ecosystem.

AirTags increase the value of having other Apple devices like iPhones, which in turn increase the value of having an AirTag (since the more Apple devices exist in the world, the more robust AirTags' tracking abilities become).

This type of ecosystem-driven feedback loop has been a key ingredient in the virtuous cycle that has fueled Apple's growth to date. But the market was not impressed with the launch, sending AAPL stock down -2% on the day.

We've talked at length about this concept in the past - the notion that for some of history's seemingly biggest fundamental developments, the market acts as if it doesn't matter - until it inevitably does - and we're pleased to see the market present this opportunity yet again.

As we've highlighted in the past, on the day AirPods first launched, Apple fell -1% as analysts expressed skepticism on Apple's ability to generate product-driven growth. Today, AirPods alone generate more revenues than half of the companies in the S&P 500.

Only time will tell if years later investors will look back on today and wonder how they missed a Fortune 500-sized revenue stream get created in front of their eyes.

Until then, we'll be taking cues from our reasoning and our views on fundamentals rather than simply what the market says.

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