Time to Think of Apple as a Global Luxury Brand
NEW YORK (TheStreet) -- I'm not an Apple
This Thanksgiving, Black Friday and holiday shopping binge, I would challenge Apple investors to think about the company in an entirely new light. Would you invest in Apple if you compared it against the world's prominent luxury brands? Would that hurt or improve expectations on Apple's long-term prospects?
Apple's obvious competitors are Google
Still, Wall Street analysts can't help themselves from comparing one unit of Apple iPhone sales to those of Windows or Android. It does little to explain why Apple has become one of the most profitable companies in the history of the world, while other device manufacturers languish with volatile and razor-thin margins.
I wonder whether it's time to evaluate Apple as one of the premier global luxury brands and find a set of comparable companies with similar margin and growth characteristics.
Maybe Apple's better comparable's would be Burberry apparel, LVMH Moet Hennessey Luis Vuitton goods, Diageo
Basically, are margin characteristics of one unit of iPhone sold closer to a unit of Windows Phones sold or a unit Johnny Walker whiskey? After all, margin is a percentage, and it's easy to do common size analysis of companies with operations of vastly different scale.
OK, fine. Comparing Apple, the most innovative Silicon Valley giant of this generation, to a maker of British trench-coats is a bit ridiculous. Those comparable would also likely create error messages in the Excel spreadsheet models of sell-side Wall Street analysts.
But here's the kicker: Buyers of the products from the aforementioned luxury brands are also more than likely to be Apple iPhone and iPad users, relative to Samsung or Microsoft.
Why do we relentlessly seek ways to compare Apple with a narrow universe of tech sector giants?
Google can take whatever global market share it wants from Apple, and yet when investors comb through both firm's earnings it is clear who is winning the battle for mobile device profits.
More importantly, as investors and analysts speculate when Apple will compete in emerging markets, where Google and Samsung products dominate, few appear to wonder what it would do to Apple's brand and luxury-like profit margins. Should Apple be chasing device manufactures into China and India, or should Apple wait for those markets to come to its products?